The head of Federated Farmers Dairy section is sticking by his calls for a review of Fonterra's on-line milk powder auction despite a Ministry of Agriculture and Forestry (MAF) statement saying it fully supports system.
During the most recent selling round, prices for whole milk powder have fallen by 3% since last month.
MAF's statement was made as part of a briefing to its minister, during which it says the auction has not caused a collapse in dairy prices nor resulted in an increase in price volatility.
It considers the auction process is a useful way to pinpoint a competitive market price.
In the statement, MAF points out that the argument that a seller should only operate a spot market when prices are rising is both short-sighted and naive, as a well-designed system should be useful to both buyers and sellers by allowing them to manage and trade risk
Federated Farmers Dairy section chair Lachlan McKenzie considers the was superficial and included statements that were fundamentally incorrect.
He says the MAF analysis did not ask whether the auction system was the best way to sell the product.
Mr McKenzie says the wool and meat industries, which use an auction system, are dysfunctional and have declined in profitability over the last 10 or 20 years.