Wednesday, June 3, 2009

Uncertainty

On June 2, 2009 Fonterra held their twelfth internet auction of whole milk powder. Wouldn’t you know the price plummeted 12%. Actually, the 12% drop was the average. The nearby August deliveries fell only 7.7%, whereas the December 2009 deliveries fell 14.2%.

Kelvin Wickham, Managing Director of Fonterra GlobalTrade in a press release said, “We need a sustained pick-up in customer and consumer demand to see any meaningful recovery in prices and that is not occurring as fast as we would like. And there’s increased uncertainty in the market because of the recent announcement of US subsidies and talk of European retaliation.” He is talking about the recently announced Dairy Export Incentive Program (DEIP) subsidy.

Actually, Fonterra exported quite a bit whole milk powder to the U.S. in the first quarter of the year at the reduced tariff rate. Fonterra increased their imports of low tariff whole milk powder by 94% over the first three months of 2008. The price, according to USITC data base was higher than the world price listed by Dairy Market News, a publication of USDA’s Agricultural Marketing Service

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