The Fonterra auction which took place on 4 November saw the average price for Whole Milk Powder across all products and contract periods averaging $2,585/tonne (£1,605/tonne), a decrease of 11.4% compared to the price achieved at the October auction. Prices at November’s auction ranged from $2,405/tonne (£1,493/tonne) to $2,700/tonne (£1,676/tonne). Four bidding rounds took place, less than the six seen in October, and well below the 10 rounds in July when the auction started. This suggests that interest among buyers has fallen back slightly as the commodity markets continue to weaken.

The next auction will take place on 2 December.

$/TONNE	January 09 (Contract Period 1)	Feb 09 - Apr 09 (Contract Period 2)	May 09 - Jul 09 (Contract Period 3)
WMP
- Regular	2,405	2,625	2,535
- Instant	2,455	2,675	2,685
- UHT	2,480	2,700	2,610
AVERAGE PRICE	2,435	2,684	2,623
CHANGE FROM LAST MONTH	-15.00%	-7.40%	-13.60%

WMP = Whole Milk Powder
Source: GlobalDairyTrade platform

The Fonterra auction takes place every month on an online trading platform called GlobalDairyTrade. It started on 3 July 2008. Fonterra accounts for more than a third of international dairy trade. Although Fonterra will only sell up to 20% of its commodities through this platform, sales results from GlobalDairyTrade provide a global benchmark for commodity prices.
Three types of contracts are made available. The so-called ‘contract period 1’ provides for products to be delivered during the third month after the trading event. The ‘contract period 2’ means that the delivery of products will take place between the fourth and the sixth month after the trading event in equal monthly deliveries. The ‘contract period 3’ means that shipment begins six months after the trading event and duration is three months.
The auction always follows the same pattern. Five days before the start of the event, volumes available and starting prices are made public. During the trading, in each successive bidding round, the price is raised. Given the announced prices, bidders enter the volume they wish to purchase. This continues until the available volume is cleared, each customer staying in as long as they enter volume bids.