Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices declined within the Global Dairy Trade (GDT) auction held March 17th for the first time in the last seven events. The GDT Price Index declined 8.8% on the session, which was the largest decline experienced since Jul ’14 on a percentage basis. Stabilization in prices has been experienced of late, with the GDT Price Index increasing by 26.6% over the past ten auctions prior to the most recent decline, although total volume sold has been below historical norms over much of the period. 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 recent price gains, the GDT Price Index remains down 33.9% YOY and 28.0% below the three year average price for the second auction of March.
Price declines were widespread across all dairy products offered at the event. Rennet casein and butter milk powder both declined by double figures, falling 15.2% and 11.6%, respectively. Whole milk powder (WMP), which accounted for over half of the GDT volume over the past two years, declined for the second consecutive auction, finishing 9.6% lower. Other price declines at the March 17th event included butter falling 9.4%, anhydrous milkfat falling 8.4%, cheddar cheese falling 7.4% and skim milk powder (SMP) falling 5.5%. Sweet whey powder and lactose were not sold at the March 17th event. U.S. SMP and butter did not trade at the event for the 15th and 16th 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 March 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 March 17th event of 20,258 MT were 8.3% lower than the previous auction and the lowest quantities sold since May ’13. Quantities sold for all products have declined for 11 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 within the March auction were 47.1% below last year’s average volumes sold for the month of March and 25.6% below the previous three year average March quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 16th 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 55.6% over the past eight auctions prior to the most recent price decline.
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 U.S. and GDT butter prices trading at largely similar values since the beginning of 2015.
GDT future month winning prices remain lower than CME futures prices, with May ’15 – Sep ’15 CME futures prices trading at an average 10.8% 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 (Apr ’15).
Cheddar cheese available for purchase at GDT auctions is currently offered only by Fonterra, so GDT winning prices in cheddar cheese are 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 a 13.1% average premium to GDT prices. Cheddar cheese was not sold at the GDT auction for Contact 1 (Apr ’15), Contract 5 (Aug ’15) and Contract 6 (Sep ’15).
GDT SMP prices converged over the second half of 2014, with Oceania and Europe prices moving downward in tandem. Oceania and Europe GDT SMP prices on short-term contracts traded within 5% of each other in 13 of the 16 events from Apr ’14 – Nov ’14. More recently, Oceania SMP prices have regained their premium, increasing to a 22 month high over Europe SMP prices. India SMP, representing product sold by Amul, traded for the fourth consecutive auction after being absent for the prior six auctions, with prices remaining at a premium to Oceania and Europe SMP prices. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the 15th 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. 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 throughout 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.
GDT and U.S. SMP prices are expected to converge throughout the third quarter of 2015, with CME NFDM futures prices trading at a 1.9% discount to GDT SMP future month winning prices in Sep ’15 when using a 35% normalized protein content. SMP was not sold at the GDT auction for Contact 1 (Apr ’15).
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 recent price gains, the GDT Price Index remains down 33.9% YOY and 28.0% below the three year average price for the second auction of March.
Price declines were widespread across all dairy products offered at the event. Rennet casein and butter milk powder both declined by double figures, falling 15.2% and 11.6%, respectively. Whole milk powder (WMP), which accounted for over half of the GDT volume over the past two years, declined for the second consecutive auction, finishing 9.6% lower. Other price declines at the March 17th event included butter falling 9.4%, anhydrous milkfat falling 8.4%, cheddar cheese falling 7.4% and skim milk powder (SMP) falling 5.5%. Sweet whey powder and lactose were not sold at the March 17th event. U.S. SMP and butter did not trade at the event for the 15th and 16th 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 March 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 March 17th event of 20,258 MT were 8.3% lower than the previous auction and the lowest quantities sold since May ’13. Quantities sold for all products have declined for 11 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 within the March auction were 47.1% below last year’s average volumes sold for the month of March and 25.6% below the previous three year average March quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 16th 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 55.6% over the past eight auctions prior to the most recent price decline.
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 U.S. and GDT butter prices trading at largely similar values since the beginning of 2015.
GDT future month winning prices remain lower than CME futures prices, with May ’15 – Sep ’15 CME futures prices trading at an average 10.8% 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 (Apr ’15).
Cheddar cheese available for purchase at GDT auctions is currently offered only by Fonterra, so GDT winning prices in cheddar cheese are 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 a 13.1% average premium to GDT prices. Cheddar cheese was not sold at the GDT auction for Contact 1 (Apr ’15), Contract 5 (Aug ’15) and Contract 6 (Sep ’15).
GDT SMP prices converged over the second half of 2014, with Oceania and Europe prices moving downward in tandem. Oceania and Europe GDT SMP prices on short-term contracts traded within 5% of each other in 13 of the 16 events from Apr ’14 – Nov ’14. More recently, Oceania SMP prices have regained their premium, increasing to a 22 month high over Europe SMP prices. India SMP, representing product sold by Amul, traded for the fourth consecutive auction after being absent for the prior six auctions, with prices remaining at a premium to Oceania and Europe SMP prices. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the 15th 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. 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 throughout 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.
GDT and U.S. SMP prices are expected to converge throughout the third quarter of 2015, with CME NFDM futures prices trading at a 1.9% discount to GDT SMP future month winning prices in Sep ’15 when using a 35% normalized protein content. SMP was not sold at the GDT auction for Contact 1 (Apr ’15).