South Africa launches online milk exchange

South Africa's dairy industry will be able to trade in milk online from September 1 with the launch of a milk exchange, the Milk Producers’ Organisation (MPO) said.
"We believe that the milk exchange will enable both milk producers and buyers to establish contracts at the best possible price, in order to help create a more efficient market environment," said MPO managing director Etienne Terre’Blanche.
"The trade platform will enable producers to make their product available to the entire South Africa, while at the same time selling their milk to the highest bidder," said Terre’Blanche. "It also gives milk buyers an opportunity to obtain milk from more producers at national level."
MPO chief economist Koos Coetzee explained that from time to time, certain regional markets had an over-production, while other markets showed a shortage. "These regional trends do not necessarily reflect the national picture. The milk exchange provides an opportunity to reduce friction in the value chain," he said.
In a free market system such as South Africa, price remained the most important market signal. When the demand for a commodity such as milk increased, so did the price.
"In reaction to this, production will also rise and the market reaches equilibrium. This can only happen when market signals flow freely through the system," said Coetzee.
The MPO said the milk trading platform would enable the simultaneous marketing of milk to multiple traders, allowing them to compete on the price. It said the transparency of the process would prevent price-fixing.
The internet-based, inter-trade system would be available to anyone with access to a computer with an internet connection.
The trading platform is a joint venture between Mposa Holdings (Pty) Ltd and Olmex (Pty) Ltd, and will be managed by Olmex Agriculture (Pty) Ltd.
Business Day