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Global Demand Prices Stable for Dairy Commodities

Fonterra Says Global Demand and Prices Stable for Dairy Commodities

Fonterra says global demand and prices for dairy commodities are stable and it expects prices will remain at current levels in the short-to-medium term.

Jay Waldvogel, Fonterra Chief Operating Officer, told a media briefing on the outlook for dairy markets that price stability was positive news viewed in the context of a high NZ dollar and the expected currency impact on payout in the next two seasons.

"Markets appear to be acting rationally at the moment. Fonterra's view is that prices are accurately reflecting supply levels and major players in the market are calmly watching signals such as export volumes, global currency movements and stock levels. Overall, product demand is good, and we are expecting prices will stay at around the same levels through 2004.

"If indeed prices remain stable in the medium term, this should provide some protection from the negative impact the high NZ dollar will have on next season's forecasted payout," he said.

Fonterra will advise shareholders of its forecast payout for next season in March.

Mr Waldvogel commented that product supply is constrained and inventories continue to be tight in New Zealand and Australia. Adding to these supply constraints is the fact that milk volumes are dropping in the United States, as are United States' milk product inventories.

He highlighted the importance of Fonterra's global supply partnerships and their role in meeting customer demand.

"Fonterra's major customers need assurances that their ingredient partner can manage supply risks such as the Australian drought situation. That's why Fonterra has made it a priority to secure supply offshore to complement our domestic milk supply. We are actively marketing product from supply partners in Australia, the US, Latin America and Europe," he said.

Mr Waldvogel said a current priority for Fonterra was to continue to take a leadership role to co-ordinate product supply with demand in the international marketplace.

"Fonterra manages around 35% of the world's dairy commodities trade, and we need to take a responsible position in the market. It is in our best interests as a global business to provide clear signals on pricing and product mix to maintain equilibrium. This ultimately benefits our shareholders as they can see consistent returns coming back into the co-operative and our customers whose risks are reduced for price and supply shocks," he said.

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