New Zealand dairy exporter Fonterra has come under fire from farmers asking for an independent review of the dairy giant’s milk auctions.


At the conclusion of Fonterra’s latest Internet auction yesterday (7 January), the company said the average selling price for whole milk powder (WMP) was US$2,017 per tonne, down 9.3% on last month.


Prices ranged from $1,920 per tonne to $2,140 per tonne. Spot prices, however, rose 1.3% above those for the December trading event.


Federated Farmers, which represents over 36,000 farmers, has questioned whether the transparency of the auction system really benefits New Zealand farmers.


“Commonsense tells us that an auction in a bear market only makes for happy buyers,” said Lachlan McKenzie, Federated Farmers Dairy spokesperson. “Fonterra’s auction seems locked in a downward spiral with prices off a jaw-dropping 54% since July.

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“Supplier-shareholders need to know whether this auction system is extracting maximum value out of WMP and frankly I don’t think it is. Given this rate of decline, will we be paying buyers to take milk powder by this time next year?”


Last month, Federated Farmers asked for a Fonterra-led review of the system to assure supplier-shareholders. This was dismissed and the federation is now calling for an independent review.


“What shareholder-suppliers want is confidence that Fonterra is acting in their interests,” McKenzie added. “A review might throw up alternatives to the auction system that will improve returns back to supplier-shareholders. A greater return for your hard effort is what farmers work long hours for.”


In December, former National MP Wyatt Creech, a director of dairy company Open Country Cheese, called on Fonterra to review the auction system, blaming it for “depressing prices” and “damaging the dairy industry”.


In response, Fonterra told New Zealand publication The Press that it has no plans to undertake a review of global dairy trade and that it is “working as intended”.