Californian milk may sell at Fonterra auctions

One of the fastest-growing United States milk cooperatives, California Dairies, says it is preparing to sell skim milkpowder (SMP) online through Fonterra's internet auctions.

California Dairies, which produces nearly a tenth of US milk, is planning to sell SMP through Fonterra's globaldairytrade website later this year, agrimoney.com reported today.

"It is being talked about for no sooner than September," said Eric Ebra, senior vice-president of administrative affairs for California Dairies, after his chief executive, Richard Cotta, revealed the plans at an industry meeting.

Fonterra already has a link with the company: it uses California Dairies milk to make cheese and yoghurt ingredients in California.

The globaldairytrade auctions currently sell nearly 600,000 tonnes -- about a quarter of Fonterra production -- annually and have run up sales of $3.2 billion since they were launched in July, 2008.

The auction has more than 300 registered bidders, in 58 countries.

But Fonterra has so far had little success in persuading northern hemisphere dairy giants to also sell products online, but a leading North American dairy lobby, the Milk Producers Council, recently conceded that the auctions were providing a reliable global benchmark for international dairy markets.

"To the extent the auction reflects international buyers' current decisions to accept future deliveries at committed prices, it perhaps could be considered one of the more reliable indications of international supply and demand," said an executive of the council, John Kaczor.

He told the agrimoney.com website that there were some continuing objections about whether the auction prices represented a fair picture of product value, but noted that the NZX was using prices from the globaldairytrade online auctions every fortnight as the basis for cash settling of dairy futures contracts.

Fonterra is still considering submissions on draft rules, developed with global dairy firms including Arla Foods and FrieslandCampina, to govern the opening up of the online auctions to outside companies.

Other companies also consulted included Australia's Murray Goulburn, and America's DairyAmerica -- which markets milk for California Dairies, and is expected to handle the globaldairytrade sales.

The submissions closed at the end of March and Gary Romano, managing director of Fonterra trade and operations, said: "All parties are keen to be open and transparent so that globaldairytrade moves to the next phase of its development with continued wide support from the global industry".