NZX run global dairy futures market nears start line

The long-delayed global dairy futures market run by the NZX is set to start in a little over a month.

It first flagged plans to launch the market last year and, after a delay to its mid-year launch date, yesterday announced it would begin trading on October 8.

The global whole milk powder futures market - the first available worldwide for this product - would allow the dairy sector organisations, including processors, manufacturers and dairy trading firms, to manage price volatility.

With futures contracts, companies can lock in prices in the multibillion-dollar whole milk powder market up to 18 months in advance.

NZX derivatives manager Kathryn Jaggard said farmers would also benefit from a view of market sentiment out into the future.

"That kind of transparency you don't have in the dairy market. You do in coffee, cocoa, wheat, sugar, virtually every other traded global food product on the planet but not in dairy," said Jaggard.

The platform had the support of FCStone, one of the largest dairy futures brokers in the world, Rice Dairy, a Chicago-based dairy commodities broker, and significant mid to large whole milk powder buyers, dairy trading firms and Australasian producers, said Jaggard.

The whole milk powder futures will be settled in cash, rather than delivery of product, making it simpler for participants.

The NZX plans to add a range of futures and options products to the market through 2010 and 2011, including skimmed milk and anhydrous milk fat futures.

Jaggard said there were huge opportunities for New Zealand in not only the dairy market but the associated financial community.

"[In] other centres where futures markets [exist], there builds a community of supporting industries which creates jobs, which creates expertise and generally is good for the economy," said Jaggard.