NZX beaten to milk powder futures

NZX will be pipped at the post in launching dairy derivatives by Chicago-based CME, the world's largest futures exchange, which announced today it will begin trading international skimmed milk powder futures and options contracts from May 9, a month ahead of NZX's plans to launch similar products.

NZX this month announced a timetable for roll-out of various dairy derivatives, starting with whole milk powder futures in June, skim milk powder futures and anhydrous milk fat futures in September, and options on dairy futures from 2011.

Fonterra has laid the groundwork for New Zealand-led global dairy derivatives through the successful creation of its globalDairytrade auction platform.

NZX identified international users of dairy derivatives as a source of new liquidity for other NZX derivative products, which it is planning for electricity prices and equities.

CME said its product would be "the first exchange-listed dairy contract with physical delivery points located around the world" and would be listed with, and subject to, the rules and regulations of CME.

"Skimmed milk in powder form has become a popular source of protein because it does not require refrigeration, making it easier to transport and store than fluid milk or dairy products containing fat," said a CME statement.

"Delivery points for the electronically traded product include Auckland, Los Angeles, Melbourne, Newark, Rotterdam and Seattle."

“These new products will provide an important tool for hedging price risk inherent in the global dairy market," said Tim Andriesen, CME Group Managing Director of commodity products and services.

The international skimmed milk powder contracts will be listed monthly with each contract representing the equivalent of 20 metric tons and a tick size of $10, CME said.

- BusinessDesk