September 3, 2010

Fonterra milk prices surge 25% amid gloomy market forecasts

Milk prices surged by 25% at Fonterra's latest auction, breaking a three-month losing streak and defying widespread forecasts of a market downturn.

The price of the near-term whole milk powder contract at the auction rebounded US$707 to US$3,624 a tonne, recovering more than half losses notched up in a declining streak since April.

Meanwhile, other products lagged whole milk powder in the Fonterra auction, with prices of skimmed milk powder rising by 15.7%, for November delivery, and near-term anhydrous milk fat, a dairy by-product used by bakers and ice cream makers, appreciating by 5.5%.

The co-operative will from this month hold two auctions a month, with the next being held on September 15.

The auction result came as Fonterra also revealed it had hired First NZ Capital-Credit Suisse, Deutsche Bank-Crags Investment Partners and exchange operator NZX to advise it on the next stage of its structural reforms, which will allow its 10,500 members to trade shares.

"Trading is not expected to begin until late in 2011 at the earliest," Jonathan Mason, the Fonterra chief financial officer, said.