Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices at the Global Dairy Trade (GDT) auction held November 18th declined for the 17th time in the last 19 auctions, falling 3.1%. Prices had begun to stabilize over the past several auctions, with the GDT Price Index down only 2.0% since Oct 1st, however the 3.1% decline was the largest in the last three 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 not experienced since mid-2012 and down 49.0% from the recent peak level experienced in Dec ’13. The November 18th event finished 46.9% below last year and 34.6% below the three year average GDT Price Index for the second week of November. Total quantity sold for all products was 12.9% lower than the previous auction and 6.2% higher than the 2014 average total quantity sold.
Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, declined 5.1% on the auction while skim milk powder (SMP) declined 5.7% and rennet casein declined 12.2%. High-milkfat product prices gained at the auction, led by anhydrous milkfat (+6.1%), butter (+6.0%), cheddar cheese (+5.0%) and butter milk powder (+1.4%). Lactose and sweet whey powder were not sold at the November 18th event. U.S. SMP and butter did not trade at the event for the seventh and eighth straight times, respectively.
The table below provides 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 November 17th 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 eighth 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 27 bi-weekly events leading up to April ’14, GDT butter prices have traded at a $0.19 average premium to U.S. butter prices. Over the past 16 auctions, U.S. butter prices have traded at a $0.95 average premium to GDT butter prices, however the most recent U.S. butter price premium of $0.73 and $0.82 are off recent highs. Due to freight charges, duties and differences in butterfat standards, butter is rarely imported domestically; however anecdotal evidence suggests that some butter and processed butterfat has been imported.
GDT future month winning prices remain lower than CME futures prices, with Jan ’15 – Apr ’15 CME futures prices trading at an average 45.0% premium to GDT prices. U.S. butter prices have traded at an 89.3% premium to GDT butter prices since Jun ’14. Butter was not sold at the GDT auction for Contract 1 (Dec ’14) or Contract 6 (May ’15).
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 traded at a premium to U.S. prices for most of 2013, with U.S. prices outpacing GDT prices for the majority of the bimonthly events since Jan ’14. CME futures prices are also trading above GDT prices in future months, with CME futures prices trading at an average premium of 32.7% to GDT prices. Cheddar cheese was not sold at the GDT auction for Contact 1 (Dec ’14), Contract 5 (Apr ’15) and Contract 6 (May ’15).
GDT SMP prices have converged since the beginning of the year, with U.S., Oceania and Europe prices all moving downward. Oceania and Europe GDT SMP prices on short-term contracts have traded within 5% of each other in 13 of the last 16 events. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the seventh straight auction after trading at 69 consecutive auctions from Oct ’11 to Aug ’14.
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 44.3% since the first of April, with Oceania short-term contracts falling 47.9% during the same period. SMP was not sold at the GDT auction for Contact 1 (Dec ’14).
The recent run-up in domestic SMP/NFDM prices relative to GDT prices is expected to continue into 2015 as CME NFDM futures prices are trading at an average 11.1% premium to the GDT SMP future month winning prices from Dec ’14 – Apr ’14 when using a 35% normalized protein content, however GDT SMP future month winning prices exceeded CME NFDM futures prices by 7.8% in May ’15.
The GDT Price Index began the year up 47.7% YOY but has declined of late, regressing to levels not experienced since mid-2012 and down 49.0% from the recent peak level experienced in Dec ’13. The November 18th event finished 46.9% below last year and 34.6% below the three year average GDT Price Index for the second week of November. Total quantity sold for all products was 12.9% lower than the previous auction and 6.2% higher than the 2014 average total quantity sold.
Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, declined 5.1% on the auction while skim milk powder (SMP) declined 5.7% and rennet casein declined 12.2%. High-milkfat product prices gained at the auction, led by anhydrous milkfat (+6.1%), butter (+6.0%), cheddar cheese (+5.0%) and butter milk powder (+1.4%). Lactose and sweet whey powder were not sold at the November 18th event. U.S. SMP and butter did not trade at the event for the seventh and eighth straight times, respectively.
The table below provides 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 November 17th 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 eighth 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 27 bi-weekly events leading up to April ’14, GDT butter prices have traded at a $0.19 average premium to U.S. butter prices. Over the past 16 auctions, U.S. butter prices have traded at a $0.95 average premium to GDT butter prices, however the most recent U.S. butter price premium of $0.73 and $0.82 are off recent highs. Due to freight charges, duties and differences in butterfat standards, butter is rarely imported domestically; however anecdotal evidence suggests that some butter and processed butterfat has been imported.
GDT future month winning prices remain lower than CME futures prices, with Jan ’15 – Apr ’15 CME futures prices trading at an average 45.0% premium to GDT prices. U.S. butter prices have traded at an 89.3% premium to GDT butter prices since Jun ’14. Butter was not sold at the GDT auction for Contract 1 (Dec ’14) or Contract 6 (May ’15).
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 traded at a premium to U.S. prices for most of 2013, with U.S. prices outpacing GDT prices for the majority of the bimonthly events since Jan ’14. CME futures prices are also trading above GDT prices in future months, with CME futures prices trading at an average premium of 32.7% to GDT prices. Cheddar cheese was not sold at the GDT auction for Contact 1 (Dec ’14), Contract 5 (Apr ’15) and Contract 6 (May ’15).
GDT SMP prices have converged since the beginning of the year, with U.S., Oceania and Europe prices all moving downward. Oceania and Europe GDT SMP prices on short-term contracts have traded within 5% of each other in 13 of the last 16 events. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the seventh straight auction after trading at 69 consecutive auctions from Oct ’11 to Aug ’14.
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 44.3% since the first of April, with Oceania short-term contracts falling 47.9% during the same period. SMP was not sold at the GDT auction for Contact 1 (Dec ’14).
The recent run-up in domestic SMP/NFDM prices relative to GDT prices is expected to continue into 2015 as CME NFDM futures prices are trading at an average 11.1% premium to the GDT SMP future month winning prices from Dec ’14 – Apr ’14 when using a 35% normalized protein content, however GDT SMP future month winning prices exceeded CME NFDM futures prices by 7.8% in May ’15.