Fonterra flags cut to domestic wholesale milk prices

By Nick Gray

Jan. 11 (BusinessDesk) - Fonterra Cooperative, the world’s biggest dairy exporter, will cut the wholesale price of milk to retailers at the end of the month.

The cut comes after the dairy cooperative put a freeze on local consumer prices and absorbed cost increases in the face of a public backlash over rising retail milk prices. Fonterra expects the lower wholesale milk price will be passed through to consumers, though that’s a decision for retailers, a spokesman told BusinessDesk in an emailed statement.

“Ultimately it is the retailer that sets the retail price for milk for New Zealand consumers,” the spokesman said. “Fonterra Brands New Zealand has notified retailers that there will be a reduction in wholesale milk price effective 30 January.”

Still, Fonterra is unsure whether the decline in wholesale milk prices will last as international prices are poised to increase.

“We will review it like any other product,” the spokesman said.

Global dairy prices have been at elevated levels for the past two years, underpinning a record pay-out to farmers last year.

Still, the price of dairy products sold on Fonterra online trading platform has declined in the past two auctions. The latest GlobalDairyTrade event on Jan 4 showed a 0.7 percent decline in the GDT-TWI Price Index to an average winning price of US$3,654 a metric tonne.

That represents a 24 percent decrease in the GDT-TWI Price Index from when prices were at a three-year high in March 2011 - an average price of US$4,826 a metric tonne, which was the highest average since the auctions began in July 2008.

Whole milk powder has fallen 22 percent from a peak high in March 2011where it had an average price of US$4,573 a metric tonne to US$3,554 at the most recent sale.

New Zealand sold $11.67 billion of dairy products, including milk powder, butter, cheese, casein and caseinates, in the 12 months ended Nov. 30, according to government figures. That accounts for about a quarter of the nation’s $47.25 billion of annual exported goods.

Fonterra exports about 95 percent of its production.

(BusinessDesk)

BUDGET 2012:
Parliament Debate Live - Video Of Budget 2011
Keith Ng Interactive Graphic: How the Budget Breaks Down
BUDGET 2012 - FULL COVERAGE: Reports / Analysis - Press Kit - Reaction (from everybody) - Previews (from everybody) - Pre-Budget Announcements

Gordon Campbell: On the Budget’s Spreadsheet Victories

It wasn’t as if expectations were sky high, exactly. Chances are, it was always more likely that we’d be seeing Bigfoot rampage through the Beehive lock-up than catch a glimpse of a credible growth agenda from this government. More >>

Sludge Budget Report - Short The Dollar! MEMO: To international bankers FROM: C.D. Sludge Please short the dollar! It'll be good for both you and us. And you know you want to. Greexit, Eurogeddon... watch out... flight to quality and all that. Follow your instincts. The NZ Debt Management Office has been so surprised at the unprecedentedly low interest rates that it can borrow at that it has already entirely pre-funded the 2013 fiscal deficit - all $8 billion of it! More >>

Pattrick Smellie Comment: Doddling along the best we can hope forCriticising Budgets for lacking vision or imagination is like shooting fish in a barrel, but even so, this year's Budget again feels like a missed opportunity. Perhaps it's the intrusion of real world needs that means the government couldn't make better political use of the $558.8 million it expects to gather in its first partial asset sale. More >>