22 Dec 2008

Falling dairy prices not due to on-line auction system - Fonterra

1:14 pm on 22 December 2008

Fonterra has dismissed claims that its on-line auction system has contributed to falling international dairy prices.

A rival company, Open Country Cheese, published an open letter to Fonterra shareholders in some print publications on Monday, asking them to push for a review of the system, which it says, has exaggerated price decreases.

Fonterra's global on-line trading accounts for less than 10% of the dairy company's total sales.

But Open Country Cheese says that since the first round of trading, the milk price has dropped by $US400 per tonne each time.

Although falling dairy commodity prices and the global economic slowdown have a part to play in the price decreases, Open Country Cheese says the on-line auction system is not helping matters.

But Fonterra's global trade managing director Kelvin Wickham says the system provides a clearer reflection of whole milk powder prices on the international market.

He says if they stopped using the system now, it would discourage customers from using it in the future.

However, Federated Farmers dairy section chair Lachlan McKenzie says the organisation would support a review of the auction system early in the new year.