KEY POINTS:
Dairy giant Fonterra, which controls nearly 40 per cent of international trade in milkpowders and other milk-based commodities, says more than 80 per cent of its big powder customers have signed up for internet trading.
Fonterra will launch an online trading platform, globalDairyTrade, in less than six weeks.
It said most of its large commodity whole-milk powder customers had registered to use the website.
The move to internet-based trading was announced in April, as a response to increased price volatility in international markets.
The price for whole-milk powder had traded in a band of US$2000 ($2574) to US$2500 a tonne for 15 years but within a few months shot up to US$5000.
Fonterra was unable to take full advantage of soaring commodity prices last summer because a lot of its production had been committed in advance sales at lower prices.
Historically, Fonterra has mostly negotiated directly with customers with contracts often lasting up to a year, but that system cannot react quickly to the dramatic changes seen in international dairy markets.
Fonterra is the world's largest dairy exporter and the fifth largest dairy company in the world, with annual turnover of $14 billion.
"The markets have changed and fundamentally changed in terms of the supply and demand dynamics that are out there," Fonterra managing director of global trading Kelvin Wickham said in a statement.
"Prices will move up and down, often unpredictably, in response to supply and demand shocks."
The internet platform had been designed to help Fonterra customers manage price exposure in such a market, but would be effective in any market conditions.
"Management of commodity price risk is something customers have been asking Fonterra to provide for them," he said.
Initial interest had been, "on the whole, extremely positive", and over 100 customers have taken part in online tutorials to prepare for the July launch.
Customers will tender for commodity products each month through globalDairyTrade, and the cooperative expected about $1b of whole-milk powder to be traded electronically in the first year, with other commodity groups added later.
The online sales system run by an independent trading manager will get the market to set the reference price for base commodities, selling up to 20 per cent of New Zealand dairy commodities.
The amounts will be announced in advance and after a number of bids, prices will match demand with all customers paying the same price.
Mr Wickham said the manager of globalDairyTrade would be Paul Grave, who has managed sales and operations planning for Fonterra's milk protein business, after five years in the company's United States office.
- NZPA