End of decline for milk powder prices?

“Today’s increase in the price of whole milk powder reinforces Federated Farmers prediction that commodity prices may be levelling out,” says Lachlan McKenzie, Federated Farmers dairy chairman.

“With the conclusion of Fonterra’s internet-based sales platform, globalDairyTrade, early this morning, the average price achieved across all products and contract periods for whole milk powder was up by 16.6 percent compared with last month.

“Despite this month’s positive outcome, Federated Farmers is still calling for an independent review of the internet-based sales platform.

“When grain and seed prices levelled out at the end of 2008, Federated Farmers predicted the price of whole milk powder would soon follow suit and this appears to now be happening.

“Grain crops seem to be the proverbial canary in the commodities mine, yet current data emerging locally and internationally points to the fact that grain and seed prices are steadily on the increase.

“Federated Farmers believes this is cause for guarded optimism over the price of whole milk powder. While grain and seed prices were the first to fall sharply in early 2008, followed closely by other commodities such as milk powder, they were also the first to level out.

“If the recent decline in on-farm input costs, such as fertiliser and fuel continues, then it is likely the price of whole milk powder will also level out, as appears to be the case from today’s globalDairyTrade.

“However, a transparent assessment of the system by Fonterra for Fonterra supplier-shareholders is still necessary.

"If a review found nothing untoward with the auction system, great. If it did, then any remedial action would likely increase returns back to farmers. After all, that’s why we support a cooperative business to ensure returns get back to farmers.

“I really don’t see what there is to be lost in a review of the auction system by Fonterra for Fonterra supplier-shareholders.

“Federated Farmers is acting in the interests of our members by renewing its call for a review of the online auction system,” Mr McKenzie concluded.