Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices continued their recent declines at the Global Dairy Trade (GDT) auction held August 19th. The GDT Price Index declined 0.6% on the session, the 12th decline in the last 13 auctions. The GDT Price Index represents a weighted-average of the percentage changes in prices between trading events for all products offered.
The GDT Price Index began the year up 47.7% YOY but has declined of late, regressing to levels below the three year average prices and down 40.3% from the recent peak level experienced in Dec ’13. The August 19th event finished 39.1% below last year and 22.0% below the three year average GDT Price Index for the second week of August. Total quantity sold for all products was 4.1% below the previous auction but 19.7% higher than the 2014 average total quantity sold.
Butter and anhydrous milkfat (AMF) prices increased 4.9% and 3.6%, respectively, which helped to support whole milk powder prices. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, increased 3.4%. All other products continued to decline, with skim milk powder (SMP) and cheddar cheese leading the losses, down 12.0% and 7.9%, respectively.
See the table below for a summary of the most recent GDT weighted average winning prices for key products. Butter has been adjusted to 80% butterfat and SMP has been adjusted to 35% protein content (equivalent to U.S. NFDM) in the $/lb columns below. CME spot and average futures prices are based on August 19th preliminary figures. CME average futures prices are weighted average prices based on the most recently reported percentage of the total quantity sold in each GDT contract period.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the second straight auction after trading at each auction since being offered in Jul ’13. Butter offered by U.S. sellers for short-term contract periods has recently traded at a significant premium to butter offered by Oceania sellers for short-term contract periods, representing product sold by Fonterra. July ’14 U.S. / Oceania butter price premiums within the GDT auction were the highest ever experienced.
GDT winning prices in butter have been historically higher than U.S. butter prices until the recent run-up in domestic butter prices. Over the past 26 bi-weekly events leading up to April ’14, GDT butter prices have traded at a $0.20 average premium to U.S. butter prices. Over the past nine auctions, U.S. butter prices have traded at a $0.66 average premium to GDT butter prices, with the most recent two event’s premiums of $1.24 and $1.18 being the highest over the period. Due to freight charges, duties and differences in butterfat standards, butter is rarely imported domestically and is not expected to in the near future despite the recent divergence in international prices.
GDT future month winning prices remain lower than CME futures prices, with Oct ’14 – Jan ’15 GDT butter trading at an average 37.0% discount to CME futures prices. Butter was not sold at the GDT auction for Contract 1 (Sep ’14) or Contract 6 (Feb ’15). GDT butter prices have traded at a 38.6% discount to U.S. butter prices since Jun ’14.
Cheddar cheese available for purchase at GDT auctions is currently offered only by Fonterra, so GDT winning prices in cheddar cheese is a viable metric for Oceania prices. GDT prices have traded at a premium to U.S. prices until recently, with U.S. prices outpacing GDT prices since Jan ’14. CME futures prices are also trading above GDT prices in future months. Cheddar cheese was not sold at the GDT auction for Contact 1 (Sep ’14), Contract 5 (Jan ’15) and Contract 6 (Feb ’15).
GDT SMP prices have seen recent convergence, with U.S., Oceania, Europe and India prices moving downward in tandem. U.S., Oceania and Europe GDT SMP prices on short-term contracts have traded within 5% of each other in eight of the last ten events. India SMP, representing product sold by Amul, was not sold for Contract 1 and Contract 2 periods since the first week of May. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the first time since being offered in Oct ’11.
Within the GDT auction, SMP offered by U.S. sellers on short-term contracts has recently traded at a premium to SMP offered by Oceania sellers on short-term contracts, representing product sold by Fonterra. Recent U.S. / Oceania SMP price premiums within the GDT auction have been the highest since Sep ’12. The gain in U.S. SMP prices relative to Oceania SMP prices within the GDT auction is due to a more severe decline in Oceania SMP prices in recent months. Overall, the GDT SMP Price Index fell 30.4% since the first of April, with Oceania short-term contracts falling 34.5% during the same period.
The recent run-up in domestic SMP/NFDM prices relative to GDT prices is expected to continue throughout the next few months as CME NFDM futures prices are trading at an average 7.4% premium to the GDT SMP future month winning prices from Oct ’14 – Dec ’14 when using a 35% normalized protein content. GDT SMP prices in more forward months are expected to gain on domestic prices, with Jan ’15 – Feb ’15 GDT SMP is trading at an average 2.2% premium to CME NFDM futures prices.
The GDT Price Index began the year up 47.7% YOY but has declined of late, regressing to levels below the three year average prices and down 40.3% from the recent peak level experienced in Dec ’13. The August 19th event finished 39.1% below last year and 22.0% below the three year average GDT Price Index for the second week of August. Total quantity sold for all products was 4.1% below the previous auction but 19.7% higher than the 2014 average total quantity sold.
Butter and anhydrous milkfat (AMF) prices increased 4.9% and 3.6%, respectively, which helped to support whole milk powder prices. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, increased 3.4%. All other products continued to decline, with skim milk powder (SMP) and cheddar cheese leading the losses, down 12.0% and 7.9%, respectively.
See the table below for a summary of the most recent GDT weighted average winning prices for key products. Butter has been adjusted to 80% butterfat and SMP has been adjusted to 35% protein content (equivalent to U.S. NFDM) in the $/lb columns below. CME spot and average futures prices are based on August 19th preliminary figures. CME average futures prices are weighted average prices based on the most recently reported percentage of the total quantity sold in each GDT contract period.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the second straight auction after trading at each auction since being offered in Jul ’13. Butter offered by U.S. sellers for short-term contract periods has recently traded at a significant premium to butter offered by Oceania sellers for short-term contract periods, representing product sold by Fonterra. July ’14 U.S. / Oceania butter price premiums within the GDT auction were the highest ever experienced.
GDT winning prices in butter have been historically higher than U.S. butter prices until the recent run-up in domestic butter prices. Over the past 26 bi-weekly events leading up to April ’14, GDT butter prices have traded at a $0.20 average premium to U.S. butter prices. Over the past nine auctions, U.S. butter prices have traded at a $0.66 average premium to GDT butter prices, with the most recent two event’s premiums of $1.24 and $1.18 being the highest over the period. Due to freight charges, duties and differences in butterfat standards, butter is rarely imported domestically and is not expected to in the near future despite the recent divergence in international prices.
GDT future month winning prices remain lower than CME futures prices, with Oct ’14 – Jan ’15 GDT butter trading at an average 37.0% discount to CME futures prices. Butter was not sold at the GDT auction for Contract 1 (Sep ’14) or Contract 6 (Feb ’15). GDT butter prices have traded at a 38.6% discount to U.S. butter prices since Jun ’14.
Cheddar cheese available for purchase at GDT auctions is currently offered only by Fonterra, so GDT winning prices in cheddar cheese is a viable metric for Oceania prices. GDT prices have traded at a premium to U.S. prices until recently, with U.S. prices outpacing GDT prices since Jan ’14. CME futures prices are also trading above GDT prices in future months. Cheddar cheese was not sold at the GDT auction for Contact 1 (Sep ’14), Contract 5 (Jan ’15) and Contract 6 (Feb ’15).
GDT SMP prices have seen recent convergence, with U.S., Oceania, Europe and India prices moving downward in tandem. U.S., Oceania and Europe GDT SMP prices on short-term contracts have traded within 5% of each other in eight of the last ten events. India SMP, representing product sold by Amul, was not sold for Contract 1 and Contract 2 periods since the first week of May. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the first time since being offered in Oct ’11.
Within the GDT auction, SMP offered by U.S. sellers on short-term contracts has recently traded at a premium to SMP offered by Oceania sellers on short-term contracts, representing product sold by Fonterra. Recent U.S. / Oceania SMP price premiums within the GDT auction have been the highest since Sep ’12. The gain in U.S. SMP prices relative to Oceania SMP prices within the GDT auction is due to a more severe decline in Oceania SMP prices in recent months. Overall, the GDT SMP Price Index fell 30.4% since the first of April, with Oceania short-term contracts falling 34.5% during the same period.
The recent run-up in domestic SMP/NFDM prices relative to GDT prices is expected to continue throughout the next few months as CME NFDM futures prices are trading at an average 7.4% premium to the GDT SMP future month winning prices from Oct ’14 – Dec ’14 when using a 35% normalized protein content. GDT SMP prices in more forward months are expected to gain on domestic prices, with Jan ’15 – Feb ’15 GDT SMP is trading at an average 2.2% premium to CME NFDM futures prices.