Wednesday, 13 April 2011 13:57

Online auction wins processor approval

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FONTERRA’S MOVE to open its online auction to global players has been met positively by major processors.

It signals a change of heart among major processors who two years ago blamed globalDairyTrade (gDT) for pulling down dairy prices.

Murray Goulburn is considering its participation in future auctions and says gDT: “has evolved into a significant global benchmark for pricing and market sentiment for the dairy products that are traded on the platform.

“Accordingly, as one of the key players in the international dairy market, MG was pleased to have participated in the review and the development of rules to establish a multi-seller platform,” a spokesman told Dairy News Australia.

At this stage, MG has not made any commitment to participate in the platform but continues to consider its position on future participation.

One of Europe’s largest dairy co-ops, Arla Foods has also been in talks with Fonterra. It was invited by Fonterra to comment and give advice on making gDT rules a multi-seller platform.

“We have found the discussions interesting and we are currently investigating our options and possibilities,” Arla spokesman Thomas Carstensen told Dairy News.

He says Arla Foods is a large producer of products which could be offered both for the world market, but also of interest for the European markets which is not active on the gDT platform.

“We find that Fonterra has reacted positively to our comments and made some significant changes to ensure that the gDT can work as an open market place,” he says.

Carstensen says gDT is just one part of the global dairy industry.  He believes it cannot stand alone to ensure the interactions between producers and markets.

Fonterra has released for consultation draft market rules allowing other dairy companies to sell their products on gDT.

Apart from MG and Arla, Danish co-op FrieslandCampina and US-based California Dairies and DairyAmerica have all helped Fonterra develop the draft rules.

However, no processor has confirmed participation in gDT. The platform trades around 600,000 metric tonnes of Fonterra products a year and has 300 registered bidders from 58 countries. Sales, to date, total $US3.2 billion.

The draft rules allow open access to all participants and ensure all sellers are subject to the same terms.  These are based on the existing gDT rules, but are extended to meet the needs of multiple sellers.

It also proposes an advisory board, made up of bidders and one representative from each of the first five sellers, to advice on gDT governance.

Fonterra managing director trade and operations, Gary Romano, says when gDT was launched in July 2008 it was envisaged that other sellers of dairy products would eventually join the platform.  He says the draft rules allow industry participants and stakeholders an opportunity to offer suggestions and feedback.

“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.”

Romano believes having other sellers on gDT will add more volume and will lead to even more reliable prices.  At the same time, it has the potential to attract more buyers, given the platform will offer products from different geographies, enabling better risk management, he says.

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