Fonterra to review payout after auction price boost

Fairfax Media

BOOST FOR FARMERS: Dairy farmers are looking forward to a happier New Year after 2010 prices lifted an average of 13.7 percent in Fonterra's latest monthly online dairy auction.

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Fonterra will review its payout to farmers next week after a 13.7 per cent rise in this morning's online auction of whole milk powder.

The average price on whole milk powder sold on globalDairyTrade rose for the fourth consecutive month to US$3437 (NZ$4758) per tonne, US$415 per tonne higher than the October auction.

Prices today ranged from US$3270 per tonne to US$3715 per tonne.

Prices dropped marginally in July, but were up 25.8 per cent in August, 24.2 per cent in September and 5.7 per cent in October.

Today's result could be seen as a vindication of the auction criticised by Open Country Dairy for forcing prices down during the depths of the downturn because it was too transparent.

Pete Morgan, who farms near Te Awamutu, was bowled over by the result:  "Wow, I was picking a 5 per cent rise. That is fantastic. All the pointers are going upwards.''

Mr Morgan said that  by the end of the season he was expecting to see the payout rise by at least 90 cents.

Nigel Kuzemko, Fonterra's commercial and strategy director, could not say how the rise would impact Fonterra's forecast of $5.10 per kg of milksolids, which was revised from $4.55 after the September rise.

 Mr Kuzemko said Fonterra's board would announce any change next week if the forecast shifted by 30 cents or more in either direction.

 "Customers, which include multi-nationals, nationals and regional players, are seeing an increase in price. Some are beginning to feel they need to be prudent in their buying patterns and are beginning to take the opportunity to restock,'' Mr Kuzemko said.

 "It's still been pretty fragile. It's not robust growth.''

Fonterra, which sells about 10 per cent of its output on golbalDairyTrade and uses the price to benchmark its product, traded anhydrous milk fat on globalDairyTrade for the first time this morning and achieved an average of  US$4757 per tonne after asking a starting price of $3060 per tonne.

The New Zealand dollar rose above US72c after the Fonterra auction.

The kiwi was buying US72.06c in late morning trading, up from US71.43c cents yesterday.