NZX plans June launch for milk futures

NZX is to launch its first dairy futures market in June.

Exchange derivatives manager Katherine Jaggard said interest had been high, both locally and internationally, which was an indication the dairy sector lacked such risk management tools compared to other traded commodities, like grain and coffee. . .

 . . . Farmers were interested in hedging their income against price fluctuations, but initial activity was expected from others in the industry, such as processors, buyers and traders. . .

Eventually, she would like dairy farmers to view the NZX dairy futures market on a daily basis, as they did now with the exchange rate.

“We see the exchange rate every day. It would be great to see the whole milk powder price every day.

“The data would be helpful to farmers. It would give them an idea where demand levels are,” she said.

I can see how hedging might appeal and that this market might be of interest to investors but I’m not sure if knowing the day to day demand is going to be useful to farmers.

If you’re producing widgets you might alter the supply at the whim of the market but milk harvesting isn’t like producing widgets.

A consistent trend in the price might help with a decision on whether or not to feed supplements but you can’t turn milk supply on and off to take advantage of market fluctuations.

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