September 3, 2010

NZX to begin dairy futures trading

A significant increase in the auction prices of Fonterra's dairy products on the Internet overnight have given a platform to the NZX to open global dairy futures contract trading.

The dairy futures of New Zealand products would be traded on cash and not on delivery basis and will be for whole milk powder (WMP). New Zealand has already tried its hand in futures, which did not perform well in the US.

On Thursday (Sept 1), the prices of dairy products rose after a decline of four consecutive months. Taking as a whole, the auction's trade-weighted index surged 16.9% and the average selling price for all contracts climbed up to US$3562 a tonne.

For the NZX futures, the auctioning of Fonterra's products will take place for two times a month. For this month, one has happened and the other is on September 16.

The first trading of WMP futures contracts at NZX will begin on October 8, while the other will take place on October 20. The reference prices will be based on Fonterra's prices.

Fonterra's global dairy trade Manager, Paul Grave, said, "Having two events a month will provide a lot more visibility when it comes to assessing the market direction".

In the segment of WMP, the exports of New Zealand amount nearly 700,000 tonnes a year, establishing its dominance. Fonterra is hopeful that boost in the prices will attract more bidders in 2011.