Fonterra dismisses calls to suspend GDT after tenth consecutive price fall

By Mark ASTLEY contact

- Last updated on GMT

Fonterra dismisses calls to suspend GDT after tenth consecutive price fall

Related tags: Gdt price index, Milk

Fonterra has dismissed calls for the Global Dairy Trade (GDT) online auction platform to be suspended after a tenth consecutive fall in prices.

Earlier today, in a series of tweets, Kelvin Wickham, managing director of global ingredients, Fonterra, said suspending GDT would not "solve the supply demand imbalance."

GDT, established in 2008 by New Zealand dairy giant Fonterra, is an auction platform for internationally traded commodity dairy products, including anhydrous milk fat, butter, cheddar, lactose, skimmed milk powder (SMP), sweet whey powder, and whole milk powder (WMP).

Amul (India), Arla Foods (Denmark), Arla Foods Ingredients (Denmark), DairyAmerica (USA), Euroserum (France), Fonterra (New Zealand), Land O'Lakes (USA) and Murray Goulburn (Australia) currently sell on the platform.

The GDT Price Index - a weighted average of the percentage changes in prices - fell 9.3% after yesterday's bi-monthly auction - the tenth consecutive decrease.

In response, Chris Lewis, president, Waikato Federated Farmers, called for industry-wide discussion on whether GDT should be temporarily suspended​ until the market improves. 

price index
(Image: Global Dairy Trade)

In a series of tweets from @Fonterra,​ Wickham said: "No one likes low prices but important to remember GDT has not caused low prices - they're a reflection of what's happening in the market."

"There is a supply/demand imbalance - and that's what you're seeing on GDT."

"We're doing everything to move powder and other commodity products into higher value contracts and higher margin products."

"And to those calling for GDT to be suspended, that's not going to solve the supply/demand imbalance," ​he added.

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4 comments

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Is GDT really a "wide open trading platform???

Posted by Janet CArpio,

I ask this question because Fonterra's pool of bidders is VERY EXCLUSIVE, at least in Southeast Asia. Not every interested buyers are given the chance to buy from the bidding platform. The selection of bidders is likewise very obscure and shrouded in mystery. Let this be known, because this results in a very distorted pricing. While some stakeholders are losing money, other stakeholders (the Exclusive bidders) are making a windfall.

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Strong Concept Suffers From Poor Execution

Posted by Grant Crothers,

An online auction provides a pure market driven mechanism but what economic genius decided that a 15% drop on last closing price is a good idea?

That each commodity at each auction opens at a price 15% lower than the prior auction close is at the root of the extreme downward volatility that we continue to experience.
The poor implementation of a good concept is contributing to industry woes.

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tail wagging the dog

Posted by Andrew Addison,

With such a small proportion of world milk production traded on the international market,why should the price it receives dictate the price of the large volume traded on internal markets. Countries which are over producing need to tailor production to their national requirements. As a farmer when I buy an animal at an auction, my name is called out as the purchaser it makes one wonder how wide open a trading platform the GDT is?.

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