Fonterra, the New Zealand dairy company, took the Algerian market by storm after a series of events in the international dairy market.
In an aggressive move, Fonterra participated in the Onil tender, where it bid 40,000 metric tons of Whole Milk Powder at a value of US$ 3,000 CIF, winning the bid and securing a position in the Algerian market. This strategic change meant a strong investment for Fonterra in the Algerian market, which had previously been neglected.
The reasons behind this move lie in the situation of the Chinese market, which is one of the main destinations for dairy products and lately brought bad signs for Fonterra.
The Chinese market is completely sold out for the next three months, prompting Fonterra to rethink its strategy. The largest Chinese customer, which used to buy large quantities in the GDT (Global Dairy Trade), did not make any purchases this month, marking a significant change in market dynamics.
This negatively impacted Fonterra and contributed to its decision to shift its focus to the Algerian market. The winning bid in the ONIL (Algeria) tender implied a quotation of US$3,000 per metric ton of Whole Milk Powder.
Although this price may prove to be a break-even value for the company, which could have an impact on Fonterra’s milk producers. It is possible that this lower price will affect the income of primary producers, with an estimated price of around NZD 0.40 cents per liter of milk produced.
Competition in the market also involved Poland, which took up the entire skim milk powder quota in ONIL’s tender at a price of US$ 2,700 per metric ton and delivered 10,000 metric tons.
This competitive dynamism and the results in the international market have led Fonterra to reconsider its strategy and focus on markets such as Algeria to maintain its presence and participation in global dairy exports.