Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices increased for the third consecutive Global Dairy Trade (GDT) auction held January 20th. The GDT Price Index increased 1.0% on the session to the highest price in four months. Stabilization in prices has been experienced of late, with the GDT Price Index increasing by 3.9% over the past seven auctions since the beginning of October. 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 2014 up 47.7% YOY but declined throughout much of the year, regressing to levels not experienced since Aug ’09 in early December. Despite the 1.0% increase over the last event, the GDT Price Index remains down 46.3% YOY and 32.7% below the three year average price for the second auction of January.
Overall, results were mixed at the January 20th event, with high milkfat product prices generally lower and powder prices largely higher. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, increased 3.8% on the auction while skim milk powder (SMP) increased 1.0% and rennet casein increased 3.3%. Price declines were led by butter milk powder (-6.4%), followed by anhydrous milkfat (-5.0%), cheddar cheese (-4.3%) and sweet whey powder (-4.1%). Butter prices remained mostly flat, up 0.1%, while lactose was not sold at the January 20th event. U.S. SMP and butter did not trade at the event for the 11th and 12th 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 January 16th 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.
Total quantities sold for all products at the January 20th event of 31,326 MT were 7.0% lower than the previous auction and the lowest quantities sold since Jun ’13. Quantities sold for all products have declined for seven consecutive auctions since the beginning of October.
Quantities sold for all products have also trended lower on a seasonal basis. Total quantities sold for all products in Jan ’15 events were 25.7% below last year’s volumes and 17.9% below the previous three year average January quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 12th 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. Jul ’14 U.S. / Oceania butter price premiums within the GDT auction were the highest ever experienced. Fonterra butter prices for short-term contract periods continued to decline through October but have reversed trend, increasing by a total of 42.8% over the past five auctions.
GDT winning prices in butter have been historically higher than U.S. butter prices until the run-up in domestic butter prices over much of 2014. Over the past 27 bi-weekly events leading up to April ’14, GDT butter prices traded at a $0.19 average premium to U.S. butter prices. From Apr ’14 – Dec ’14, however, U.S. butter prices traded at a $0.92 average premium to GDT butter prices. The U.S. butter price premium has been reduced in recent weeks, with GDT butter prices regaining a $0.03 premium over U.S. butter prices.
GDT future month winning prices remain slightly lower than CME futures prices, with Mar ’15 – Jun ’15 CME futures prices trading at an average 5.0% premium to GDT prices. U.S. butter prices traded at an 83.3% premium to GDT butter prices from Jun ’14 – Dec ’14. Butter was not sold at the GDT auction for Contract 1 (Feb ’15) and Contract 6 (Jul ’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 12.2% to GDT prices. Cheddar cheese was not sold at the GDT auction for Contact 1 (Feb ’15), Contract 5 (Jun ’15) and Contract 6 (Jul ’15).
GDT SMP prices have converged since the beginning of the year, with Oceania and Europe prices moving downward in tandem. Oceania and Europe GDT SMP prices on short-term contracts have traded within 5% of each other in 13 of the last 16 events from Apr ’14 – Nov ’14. More recently, Oceania SMP prices increased to a six auction high in the first week of Jan ’15 while Europe SMP prices continued to decline over the same period, although Oceania SMP prices dropped slightly in the most recent auction while Europe SMP prices increased by 4.7%. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the 11th straight auction after trading at 69 consecutive auctions from Oct ’11 to Aug ’14. Fonterra offered Australian SMP on the GDT for the first time in the Jan 20th event, with Australian medium heat SMP trading at a 3.1% discount to New Zealand medium heat SMP over the same contract period.
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. The most recent U.S. / Oceania SMP price premiums experienced within the GDT auction have been the highest since Sep ’12. Oceania SMP prices continued to decline through much of 2014 but have rebounded off of lows experienced in late Nov ’14 and are currently trading at a premium to CME NFDM futures prices. SMP was not sold at the GDT auction for Contact 1 (Feb ’15).
GDT SMP future month prices are expected to remain at a premium to CME NFDM futures prices throughout the first half of 2015. GDT SMP future month winning prices are trading at a 7.7% average premium to CME NFDM futures prices when using a 35% normalized protein content. The spread is expected to converge into the second half of 2015, with Jul ’14 GDT SMP future month winning prices trading at a 1.6% premium.
The GDT Price Index began 2014 up 47.7% YOY but declined throughout much of the year, regressing to levels not experienced since Aug ’09 in early December. Despite the 1.0% increase over the last event, the GDT Price Index remains down 46.3% YOY and 32.7% below the three year average price for the second auction of January.
Overall, results were mixed at the January 20th event, with high milkfat product prices generally lower and powder prices largely higher. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, increased 3.8% on the auction while skim milk powder (SMP) increased 1.0% and rennet casein increased 3.3%. Price declines were led by butter milk powder (-6.4%), followed by anhydrous milkfat (-5.0%), cheddar cheese (-4.3%) and sweet whey powder (-4.1%). Butter prices remained mostly flat, up 0.1%, while lactose was not sold at the January 20th event. U.S. SMP and butter did not trade at the event for the 11th and 12th 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 January 16th 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.
Total quantities sold for all products at the January 20th event of 31,326 MT were 7.0% lower than the previous auction and the lowest quantities sold since Jun ’13. Quantities sold for all products have declined for seven consecutive auctions since the beginning of October.
Quantities sold for all products have also trended lower on a seasonal basis. Total quantities sold for all products in Jan ’15 events were 25.7% below last year’s volumes and 17.9% below the previous three year average January quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 12th 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. Jul ’14 U.S. / Oceania butter price premiums within the GDT auction were the highest ever experienced. Fonterra butter prices for short-term contract periods continued to decline through October but have reversed trend, increasing by a total of 42.8% over the past five auctions.
GDT winning prices in butter have been historically higher than U.S. butter prices until the run-up in domestic butter prices over much of 2014. Over the past 27 bi-weekly events leading up to April ’14, GDT butter prices traded at a $0.19 average premium to U.S. butter prices. From Apr ’14 – Dec ’14, however, U.S. butter prices traded at a $0.92 average premium to GDT butter prices. The U.S. butter price premium has been reduced in recent weeks, with GDT butter prices regaining a $0.03 premium over U.S. butter prices.
GDT future month winning prices remain slightly lower than CME futures prices, with Mar ’15 – Jun ’15 CME futures prices trading at an average 5.0% premium to GDT prices. U.S. butter prices traded at an 83.3% premium to GDT butter prices from Jun ’14 – Dec ’14. Butter was not sold at the GDT auction for Contract 1 (Feb ’15) and Contract 6 (Jul ’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 12.2% to GDT prices. Cheddar cheese was not sold at the GDT auction for Contact 1 (Feb ’15), Contract 5 (Jun ’15) and Contract 6 (Jul ’15).
GDT SMP prices have converged since the beginning of the year, with Oceania and Europe prices moving downward in tandem. Oceania and Europe GDT SMP prices on short-term contracts have traded within 5% of each other in 13 of the last 16 events from Apr ’14 – Nov ’14. More recently, Oceania SMP prices increased to a six auction high in the first week of Jan ’15 while Europe SMP prices continued to decline over the same period, although Oceania SMP prices dropped slightly in the most recent auction while Europe SMP prices increased by 4.7%. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the 11th straight auction after trading at 69 consecutive auctions from Oct ’11 to Aug ’14. Fonterra offered Australian SMP on the GDT for the first time in the Jan 20th event, with Australian medium heat SMP trading at a 3.1% discount to New Zealand medium heat SMP over the same contract period.
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. The most recent U.S. / Oceania SMP price premiums experienced within the GDT auction have been the highest since Sep ’12. Oceania SMP prices continued to decline through much of 2014 but have rebounded off of lows experienced in late Nov ’14 and are currently trading at a premium to CME NFDM futures prices. SMP was not sold at the GDT auction for Contact 1 (Feb ’15).
GDT SMP future month prices are expected to remain at a premium to CME NFDM futures prices throughout the first half of 2015. GDT SMP future month winning prices are trading at a 7.7% average premium to CME NFDM futures prices when using a 35% normalized protein content. The spread is expected to converge into the second half of 2015, with Jul ’14 GDT SMP future month winning prices trading at a 1.6% premium.