Fonterra Futures
Volatility has been the name of the game when it comes to dairy prices. Globally, the reasons for this have been many and include the changing weather conditions in many of the dairy-producing countries and this could be something as drastic as drought and floods too. There have been a lot of changes in consumption patterns as well – there are many more dairy consumers now in emerging markets like China and India with a huge affluent class experimenting with more Western food.
Fonterra, New Zealand has always contracted with its buyers when it came to prices but with more volatility on the horizon, it wants to cut down on the time lag that this system takes before it can respond to any change in price. So it has decided to enter the cyber age with its dairy products being offered on its online sales channel, GlobalDairyTrade. This means that there is a much faster response when there are price changes and it looks like this could just mean that a futures or derivatives market in dairy could soon be set up globally.
This channel kicks off in July with the first product being milk powder. More products will be added as the year goes by. The company foresees over 20% of its commodities being sold through this channel.
