Fonterra will slash the amount of whole milk powder it expects to offer on the Global Dairy Trade auction by about a third over the next 12 months.
The Fonterra headquarters on Princes St in central Auckland. Photo: RNZ / Kim Baker Wilson
It is cutting its forecast offerings for the year by more than 56,000 tonnes, in response to the continuing slide in prices in the fortnightly auction, driven by the international over supply of dairy products.
There have been calls for Fonterra to suspend its trading on the GDT until prices pick up.
While the co-operative isn't buying that argument, Global Ingredients Managing Director Kelvin Wickham said at current GDT prices it could make more money by processing more milk into other products and selling through other channels.
"That will mean we'll have approximately 33 percent less whole milk powder on offer on GDT in the next 12 months versus the last 12 months, so that's more than a billion litres of milk there, and simply because we have better opportunities off GDT to use that milk, so commercially rational decision.
"At these prices we're seeing we'll move the milk to better returning products.
"We're selling at least 70 percent of our sales outside of GDT and of course our consumer food service business continues to grow in excess of 20 percent a year, so we need to allocate milk for those applications and customers as well."
Mr Wickham said it also takes into account a forecast drop in New Zealand's milk supply this season.