Fonterra keen on more web selling

Fonterra wants other large dairy companies to join its website auction for milk powder.

The co-operative is now selling about 20 per cent of the milk powder it produces on globalDairyTrade, but it wants to expand the web-selling mechanism.

The trade manager of globalDairyTrade, Paul Grave, said web sales were a tool to manage global uncertainty over dairy prices.

"In forward sales, someone wins and someone loses. If a customer loses, they are not happy and Fonterra doesn't want an unhappy customer. If Fonterra loses, our shareholders aren't happy."

The price of milk powder used to change by a few hundred United States dollars a month, but now it can be US$600, Mr Grave said. "We can't live with those fluctuations."

He said Fonterra got globalDairyTrade under way, but it is run by Boston company CRA and is independent of Fonterra.

The arms-length approach which Fonterra has should encourage more suppliers to the web auction, said Mr Grave.

Bidders can't see what other punters are bidding, or what price they will pay.

All bids are in US dollars, and for product on the wharf in New Zealand, so they pay any extra delivery costs.

Sixty-five countries are involved, and 270 bidders all up, and 370 tonnes of milk powder have been sold through the web auction system.

The auction covers only basic milk powders, and any with additional specifications are sold directly to customers, Mr Grave said.

"But the auction price does give us a basis on which any additional costs of specification are added," he said.

None of the product goes to Europe of the US, which have large import duties, but it goes to buyers in China, Southeast Asia, the Middle East and Central and South America.

"There has been some criticism of globalDairyTrade. People thought it caused the crash in dairy prices. I don't think they realised how widespread the crash in other commodities would be as the recession struck," he said.

There are many other dairy exporters, and Fonterra started the web auction system on its own. If it had talked to all players before the auction system started, "we'd still be talking", he said.

But it wants them to join the existing web sale system, rather than starting their own.

"Fonterra will look at adding some other products, but it won't be large. We think the growth is going to come through adding other sellers.

"We need more suppliers to cement globalDairyTrade as the global market place, and more milk powder means a more reliable price."

But Mr Grave said it was a long process, and they had no promises, but were talking to other major dairy players.

"The big dairy-milk powder processors are the US and Europe and big co-operatives. CRA in Boston has the expertise to run auctions on line and we hope they will join us. We're talking, but have no commitment from other exporters."

- © Fairfax NZ News