3 Sep 2010

Dairy prices tipped to remain strong

4:09 pm on 3 September 2010

An economist is predicting dairy prices will remain strong as economic growth around the world picks up.

The average selling price for all products at Fonterra's online auction on Thursday reversed four consecutive months of declines, climbing 17% to $US3562 a tonne.

BNZ economist Doug Steel attributes the unexpectedly strong rebound to improving demand and tight supplies because of the drought in Russia.

Mr Steel says that despite continuing volatility, price should remain strong in the long term.

NZX to design Fonterra share trading market

Meanwhile, Fonterra has chosen stock market operator NZX to design its new share trading market.

In June, Fonterra's farmer shareholders voted in favour of developing a market for farmers to trade shares with each other.

The dairy giant believes the move will free up money to invest back into its business.

Chief financial officer Jonathan Mason says NZX won the contract because of its experience in designing and building trading markets and its local knowledge of conditions and regulations.

Mr Mason says the farmer-only exchange will operate on Fonterra's intranet site, Fencepost, and will be built from scratch.

He says details of how the trading will work are still at an early stage, and it's too early to speculate about what shape the market will take.

Trading isn't expected to begin until late next year at the earliest.

Fonterra says it is also working with external advisors with specific capital markets experience, including First NZ Capital and Credit Suisse, and Deutsche Bank-Craigs Investment Partners.