GDT partnership with NZX, EEX a 'perfect fit' for Fonterra

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Yesterday Fonterra announced it agreed to a strategic partnership with New Zealand's Exchange (NZX) and the European Energy Exchange (EEX) to each take ownership stakes in Global Dairy Trade (GDT) alongside the co-op.

Once completed, the arrangement will see each partner holding an equal third (33.33 per cent) shareholding in GDT and working together to grow the auction platform's presence across Asia and Europe where EEX and NZX have comprehensive coverage.

The announcement was "a really positive one for our co-op and GDT, which we've owned for nearly 15 years," chief financial officer at Fonterra, Marc Rivers said.

"We've secured the best partners with NZX and EEX. They're really closely aligned with us on the future possibilities for the [GDT] platform and we're just really excited about it," Rivers told The Country Sport Breakfast's Brian Kelly.

"I think it's really good news for farmer-owners, for unit holders and actually all dairy industry participants and it's expected to lead to greater volumes being traded on GDT."

Dairy was one of the most volatile traded commodities, which was a "real risk" to the co-op, its farmer-owners and customers, Rivers said.

"We're constantly managing the price risk and everything associated with that."

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However, extra participants on GDT would create a more liquid dairy trading environment and allow for the creation of financial tools which could be used to better manage price volatility, Rivers said.

Another benefit of the partnership was that it would enhance GDT's standing as an independent auction platform.

"I expect that's going to lead to greater volumes being traded on GDT by more participants."

The move was a perfect fit with Fonterra's strategy, Rivers said.

"We expect it's going to support us moving more of our milk into higher-value products while ensuring that there's enough activity on GDT to set a robust Farmgate Milk Price."

As overall GDT volumes grew from a greater number of sellers, Fonterra would have more ability to shift some physical product off the platform, Rivers said.

"We're looking forward to working together with EEX and NZX to grow GDT's presence across Asia and Europe. It's going to support our focus of moving milk into those higher-value products."