Web trading points way for Fonterra

Fonterra chief executive Andrew Ferrier said improving market conditions had been reflected in trading on Fonterra's globalDairyTrade online platform.

Since the September forecast revision to $5.10, there have been two monthly trading events, the most recent when whole milk powder (WMP) prices rose by an average 13.7 per cent.

Over the past four months, average WMP prices on globalDairyTrade had risen by a total of 88 per cent.

There was a tight supply situation globally for many dairy commodities.

Fonterra had also confirmed some key contracts with major customers, Ferrier said.

"Although prices for all dairy products are now increasing, the recovery has been strongest across the range of commodity milk powder streams that are used as the basis for the milk price component of payout to Fonterra farmers.

"This is good for our farmers, as it drives a higher milk price, but it is putting profits under pressure," he said.

Prices for non-powder products such as cheese and casein had not risen at the same rate as powder prices.

The new $6.05 payout forecast includes a $1.10 rise to $5.70/kg milksolids for the milk price part of the total, but the distributable profit part fell 15c to 35c/kg milksolids.

Under Fonterra's new milk price, if Fonterra could not achieve an equivalent return for those products compared to milk powders, the difference came off profit.