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Fonterra is significantly reducing quantities it will offer on the GlobalDairyTrade (GDT) auction for the next 12 months including a shift away from whole milk powder.
The cooperative's forecast offer volumes over the next 12 months for New Zealand products have been decreased by a further 56,045 metric tonnes with a 62,930 metric tonne decrease occurring over the next three months.
A total of 6885 metric tonnes of planned volumes are forecast to be added back later in the year in anticipation of changing market conditions.
Fonterra managing director global ingredients, Kelvin Wickham says 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.
"In terms of our product mix, Fonterra 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," says Wickham.
From a supply perspective, Fonterra's reduction of GDT volumes reflects the latest production forecast for the coming season where the cooperative currently expects its farmers to reduce milk supply by at least 2%.
This reflects the likely impact of farmers using more traditional practices to manage their farm businesses within the limits of a low payout forecast.
Fonterra says that, despite recent low prices GDT continues to be a credible and transparent mechanism for international price discovery.
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