increase font size
Fonterra’s Kelvin Wickham says suspending GDT will not resolve the current supply/demand imbalance for dairy products.
Fonterra is brushing off calls to suspend its online dairy auction as a means of arresting the decline in milk powder prices.
The co-op’s managing director global ingredients, Kelvin Wickham, says suspending GDT will not resolve the supply/demand imbalance in the world market.
“GDT has not caused low prices. Low prices are a reflection of the market which is currently oversupplied with dairy product while dairy importing countries face political, social and economic challenges,” he told Rural News.
Calls to suspend the Global Dairy Trade (GDT) auction gained momentum on social media last week.
Federated Farmers Waikato president Chris Lewis called for an industry-wide discussion on whether GDT should be temporarily suspended until the market improved.
Lewis claimed GDT was a major contributor to the decline. “It’s been gamed by buyers and the price for that is being paid by [the] New Zealand farmer.”
Temporarily suspending the GDT was a “reasonable question” to ask, given the unprecedented and volatile times the industry faced.
He was backed by New Zealand First leader Winston Peters. “Auctions are great in bull markets like the Auckland property bubble, but it is a terrible way to sell when markets turn ugly, as the record low price for whole milk powder indicates,” Peters says.
Fonterra stopped selling milk protein concentrate (MPC70) through the auction in March 2014, Peter says. “So the co-op has form in doing what we suggest, albeit, with a small product line.”
The calls to exit GDT come after Fonterra slashed $1.40 from its forecast for the 2105-16 season to $3.85/kgMS, two days after dairy prices fell 9.3% in the latest auction. It was the 10th consecutive fall on the platform, dairy prices falling to levels not seen in 13 years.
But Wickham says everyone must remember GDT has not caused the low prices.
Nearly all the product offered in the last GDT event was sold to willing buyers, notes Wickham.
“There is a supply/demand imbalance and that’s what you’re seeing on GDT. Particularly, constraints on demand from big dairy importing countries (China slowdown and inventories, Russia import bans)… and milk supply continues to grow in Europe and US which is spilling over into soft global demand.
“We’re doing everything to move powder and other commodity products into higher value contracts and higher margin products.
“And to those calling for GDT to be suspended, that’s not going to solve the supply/demand imbalance.”
However, Fonterra may be looking at making changes to GDT. Chief executive Theo Spierings said during a television interview that drastic changes to GDT may be required to support dairy prices. The record low prices on GDT were “below the bottom” and “absolutely not sustainable.”
Fonterra is considering significant changes to GDT, given that prices were now below the government intervention levels seen in Europe, Spierings says.
“We have to look at some more drastic thinking on our GDT auction, because in Europe there’s a kind of a bottom created by governments, and we don’t have that, so we have to look at out-of-the-box solutions.”
Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.
OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.
OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.
Fonterra has delivered a fifth straight year of record organic milk price for farmer suppliers.
Fonterra says favourable weather conditions supporting pasture growth is boosting milk production.
Like many manufacturers around the world, European agricultural machinery and tractor manufacturers are currently operating in a difficult market environment. But they are heading to the world’s largest agricultural machinery event in Hanover next month with a degree of cautious optimism.
Established in 2021, the John Deere Technician of the Year Awards champion the important contribution parts and service technicians make to the Australian and New Zealand agriculture, construction and forestry industries.
Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.
New Zealand is closer to eradicating bovine TB than ever before, but possums remain a threat, says Beef + Lamb New Zealand.
Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.
The ACT Party says media reports that global dairy giant Nestle has withdrawn from the Dairy Methane Action Alliance shows why New Zealand needs to rethink its approach to climate.
