Fonterra to cut significantly the volume of product sold on GDT

Fonterra is significantly reducing its GlobalDairyTrade (GDT) offer quantity forecasts for the next 12 months.

Since its inception in 2008 Fonterra has traditionally been the biggest volume seller on the platform and today’s announcement will see the volumes it offers reduce by a third.

In a statement, the world’s largest co-operative has said the forecasted offer volumes over the next 12 months for New Zealand products have been decreased by 56,045 metric tonnes. A 62,930 metric tonne decrease is forecast over the next three months and 6,885 metric tonnes of planned volumes being added back later in the year in anticipation of changing market conditions.

Fonterra Managing Director Global Ingredients, Kelvin Wickham said the changes come in response to current conditions on both the demand and supply sides of the global dairy market.

“In response to current conditions in the global dairy markets, we have further modified our product mix to shift volumes away from base Whole Milk Powder (WMP) and into our other products in our portfolio such as value-add ingredients, consumer and foodservice.

Fonterra has said that in terms of its product mix, the co-operative is now selling approximately 70% of its total product via channels other than GDT and as a result we do not expect a material impact on inventories.

Global Dairy Trade
Global Dairy Trade

From a supply perspective, Fonterra says the reduction of GDT volumes reflects the latest production forecast for the coming season where the Co-operative currently expects its farmers to reduce milk supply by at least 2%.

Fonterra says the fall reflects the likely impact of farmers using more traditional practices to manage their farm businesses within the limits of a low milk price forecast.

Fonterra has said that, despite recent low prices GDT continues to be a credible and transparent mechanism for international price discovery.

Global Dairy Trade down 23% since June

Last week’s Global Dairy Trade (GDT) auction, overall dairy prices slid 9.3% – adding in the fall from the July auctions overall prices have fallen a combined 23.8% since June.

Whole Milk Powder (WMP) prices have fallen over 30% over the period and when the current price of $1,590 is converted into an equivalent Irish milk price the value is now 10.85c/L – down from highs of 40c/L in January 2014.