High Stocks Impact 2009 Performance

NEW ZEALAND - This week Fonterra’s interim report noted that revenues for the six months to the end of January 2010 declined by 3.7 per cent to $7.7bn, largely due to lower global dairy prices compared to the same period last year. However, Andrew Ferrier, CEO noted improved demand had helped Fonterra lower stock levels for the end of the period.
calendar icon 29 March 2010
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Reducing stock levels also had an impact on the performance of domestic Chinese dairy companies, says Breiffini Kennedy, Asia Manager, Bord Bia. American Dairy last week reported that sales in Q4 2009 were hit by “sales of excess inventory as lower-margin raw milk powder in an effort to manage inventory levels”.

Nevertheless, the company’s total sales increased by 40 per cent to US$271m for the year. The company reported that during 2009 sales of milk powder increased by 73 per cent to over 28,000 tonnes at a value of US$216m.

Last week Want Want China Holdings noted the impact of stock inventory on profits as “the quantity of expensive milk powder was gradually consumed” and the cost of milk powder declined.

With the next Fonterra Auction being held on Tuesday 6th April, CEO Andrew Ferrier said that “there were signs of stability returning” to global dairy markets. Mr Ferrier noted as an example that over the past five months the Fonterra auction price for Whole Milk Powder (WMP) was between US$3,250 and US$3,600. With the March Fonterra Auction price for WMP 52 per cent higher than the same time last year Chinese buyers are likely to seek to continue to broaden their import base over the coming months.

The need to reduce stocks has seen a reduction in China whey powder imports for the first two months of 2010.

TheCattleSite News Desk

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