The world's biggest dairy trader, Fonterra Co-operative Group, warned today of more volatility looming in global dairy prices.
"It is clear that 2007-2008 has fundamentally changed market dynamics and volatility is more likely to be the norm, rather than the exception, in the medium term," said the cooperative'schairman, Henry van der Heyden.
"With global financial confidence tenuous at best and the inevitable lag between price signals guiding farmer decisions around production, there is every possibility of an imbalance between demand and supply influencing prices."
In an annual review just sent to shareholders, Mr van der Heyden said market unpredictability, rising costs, a high exchange rate for the New Zealand dollar, and financial turmoil made the business environment "challenging" in the 14 months to July 31.
Average dairy prices achieved by the cooperative during the 14 months were US$4350 ($7899) a tonne, up 62.7 per cent on US$2673 a tonne in the previous 12 month period.
International milkpowder prices peaked at around US$5000/tonne in late 2007 but more recently have fallen back to around US$2600 a tonne.
But Mr van der Heyden noted that despite the volatile conditions, Fonterra achieved its best-ever financial result in 2007/08, generating $9.3 billion for farmer shareholders.
