Wellington, May 4 NZPA - Fonterra has set up a dairy price index to measure price movements at its global dairy trade auctions online.

The GDT-TWI (Global Dairy Trade-Trade Weighted Index) will be published after the next auction early tomorrow, but instead of detailing prices it will display an index of 1000 points based on the prices paid in March this year.

The online auctions have become important in setting commodity prices for milksolids, and capture up to 30 prices over a number of products including skim milkpowder, whole milkpowder and anhydrous milkfat, an industrial butter oil.

Fonterra said the index will effectively provide a "headline" number for the market, by showing the percentage change in an average price of a basket of the products currently traded, weighted according to trade flows in international dairy markets.

The cooperative's online dairy auctions started in July 2008, and have since notched up sales worth about $US1.3 billion.

Next year the service will sell about 20 per cent of Fonterra's domestic production.

Prices soared in last month's auction, with the average price for whole milkpowder rising by 21 percent to $US3969 a tonne, but global dairy trade manager Paul Grave said Fonterra did not know whether the jump in prices was a blip or a trend.

"This market is impossibly difficult to predict at the moment," he said.

The past few months had been steady and the high prices in April were a result of strengthening global demand and reduced supply as the Australasian production season drew to a close, Mr Grave said.

Last month the ANZ commodity price index hit record levels after a 9.9 percent jump in its dairy prices last month.

The overall index, which measures changes in price for a basket of commodity exports, rose 4.9 percent for the month to 235.2 on the back of price increases for 10 of the 13 products it monitors.

There have only been five such simultaneous jumps in a large number of commodities since the index began in 1986, the most recent in May 2006. Since then the index for dairy products has see-sawed.

In the 2009 calendar year, exports of dairy products -- milkpowders, butter and cream products, cheese, casein and whey -- amounted to over $9 billion of the $40 billion of total NZ overseas merchandise trade. Milkpowders account for nearly half of those exports.

Over a third of New Zealand's dairy products are exported to East Asia, 11 percent is sent to North America and 7 percent is shipped to both Europe and South America.

China has overtaken the United States as our largest single market for dairy product exports. Last year, dairy product exports to the China amounted to over $1 billion, as middle class consumers switched from domestic milk in the wake of the melamine-tainted milk poisonings.