21 Dec 2008

Call for Fonterra to review its monthly auction system

9:13 pm on 21 December 2008

A Waikato cheese company says Fonterra's monthly auction system is partly to blame for the falling international milk powder prices.

Open Country Cheese is calling on Fonterra's farmer shareholders to push for a review of the system.

The company says since the first round of global on-line trading, the milk price has dropped by $US400 a tonne each time.

A director, Wyatt Creech, says while the global economic slowdown and falling demand for commodities will have some part to play in the falling prices, the auction system has exaggerated the decrease.

He says part of the idea behind having a big single player in the market place is so that it could use it's market grunt to help modify the volatility in pricing.

But Mr Creech says there is little point in that if an open auction is used to determine what things are worth.

He says Open Country Cheese has added to the volatility because when people think the price of a product is going to fall they tend to hold off buying.

Mr Creech says the company is asking farmers to put their thinking caps on to consider this issue.

Fonterra has stated publicly before that it doesn't think its auction system is to blame for the falling prices, and the decreases would have occurred anyway.