Global Dairy Trade Results Update – 6/15/16
Executive Summary
Overall, dairy product prices were unchanged during the GDT event held Jun 15th. Highlights from the most recent auction include:
• The GDT Price Index finished flat at the Jun 15th event, remaining at the highest level experienced since the second auction of January.
• Cheddar cheese and butter prices increased most significantly at the Jun 15th event, however gains were offset by declines in whole milk powder and butter milk powder prices.
• Total quantities sold for all products at the Jun 15th event finished 4.2% below the previous event while total June volumes sold finished 8.9% below last year’s average volumes sold for the month of June.
Additional Report Details
Dairy product prices were unchanged within the Global Dairy Trade (GDT) during the auction held Jun 15th as the GDT Price Index remained at the highest level experienced since the second auction of January. The GDT Price Index declined by 46.8% in total over the ten auctions spanning Mar ’15 – Aug ’15 but had gained back nearly three quarters of the decline from Aug ’15 to Oct ’15. The GDT Price Index had fallen back to a 14 auction low during mid-March but remained at a ten auction high during the most recent event. 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 finished 3.4% above the previous year price levels at the Jun 15th event but remained 33.5% below the three year average price for the second auction of June. The GDT Price Index had finished lower on a YOY basis for 14 consecutive auctions prior to the two most recent events.
Within the latest auction, price gains were led by cheddar cheese (+6.9%), followed by butter (+5.3%), anhydrous milkfat (+4.4%), skim milk powder (+1.5%) and lactose (+0.6%). Declines in prices were experienced within rennet casein (-0.4%), whole milk powder (-4.5%) and butter milk powder (-6.6%). U.S. SMP and butter did not trade for the 45th and 46th consecutive times, respectively, at the Jun 15th event.
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 Jun 14th 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 Jun 15th event of 23,089 MT were 4.0% less than the previous auction but remained at the fourth highest figure experienced throughout 2016.
Volumes sold for all products within the June auctions remained 8.9% below last year’s average volumes sold for the month of June and 16.2% below the previous three year average June quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 46th consecutive 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. After declining to record lows during Aug ’15, Oceania butter prices for short-term contract periods increased to an eight month high during the December 1st auction before once again declining to a ten auction low during the Apr 5th event. Oceania butter prices over short-term contract periods increased for the third consecutive auction at the most recent event, finishing at a ten auction high.
GDT winning prices in butter have been historically higher than U.S. butter prices until the run-up in domestic butter prices beginning in 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 was reduced throughout the early months of 2015 but has rebounded over more recent auctions. U.S. spot butter prices are currently trading at a 76.5% premium to GDT prices while CME futures prices are trading at an 84.2% premium to GDT prices from Jul ’16 – Dec ’16. U.S. butter prices traded at an 83.3% premium to GDT butter prices over the second half of 2014 and a 53.9% premium to GDT butter prices throughout 2015.
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. U.S. cheddar cheese prices have traded at a premium to GDT prices for the majority of the bimonthly events since Jan ’14 after trading at a discount for nearly all of 2013. U.S. spot cheddar cheese prices are currently trading at a 17.6% premium to GDT prices while CME futures prices are trading at a 30.9% premium to GDT prices from Jul ’16 – Oct ’16. Cheddar cheese was not sold at the GDT auction for Contract 2 (Aug ’16), Contract 5 (Nov ’16) and Contract 6 (Dec ’16).
Oceania and Europe GDT SMP prices have converged since mid-2014 as prices have moved downward in tandem. Oceania SMP prices remained within $0.06/lb of Europe SMP prices at the Jun 15th GDT auction as both prices increased from previous levels. U.S. SMP, representing product sold by Dairy America, did not trade for the 45th straight auction after trading at 69 consecutive auctions from Oct ’11 to Aug ’14. Dairy America is currently the only U.S. seller offering SMP within the GDT as Land O’ Lakes has formally withdrawn from the global auction platform. India SMP, representing product sold by Amul, was also not sold at the Jun 15th event.
Although SMP offered by U.S. sellers has not traded since Aug ’14, the most recent U.S. / Oceania SMP price premiums experienced within the GDT auction have been the highest experienced since Sep ’12. Oceania SMP prices over short-term contract periods reached a new low at the August 4th auction prior to trending higher throughout October and then declining once again to an 18 auction low during the May 17th event. Oceania SMP rebounded to a seven auction high at the most recent auction.
U.S. NFDM spot prices are currently trading 4.2% below GDT SMP prices however U.S. NFDM prices are expected to regain a premium to GDT SMP prices during future months, as U.S. prices are trading at an 11.1% average premium to GDT prices from Jul ’15 – Dec ’15.
The GDT Price Index finished 3.4% above the previous year price levels at the Jun 15th event but remained 33.5% below the three year average price for the second auction of June. The GDT Price Index had finished lower on a YOY basis for 14 consecutive auctions prior to the two most recent events.
Within the latest auction, price gains were led by cheddar cheese (+6.9%), followed by butter (+5.3%), anhydrous milkfat (+4.4%), skim milk powder (+1.5%) and lactose (+0.6%). Declines in prices were experienced within rennet casein (-0.4%), whole milk powder (-4.5%) and butter milk powder (-6.6%). U.S. SMP and butter did not trade for the 45th and 46th consecutive times, respectively, at the Jun 15th event.
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 Jun 14th 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 Jun 15th event of 23,089 MT were 4.0% less than the previous auction but remained at the fourth highest figure experienced throughout 2016.
Volumes sold for all products within the June auctions remained 8.9% below last year’s average volumes sold for the month of June and 16.2% below the previous three year average June quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 46th consecutive 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. After declining to record lows during Aug ’15, Oceania butter prices for short-term contract periods increased to an eight month high during the December 1st auction before once again declining to a ten auction low during the Apr 5th event. Oceania butter prices over short-term contract periods increased for the third consecutive auction at the most recent event, finishing at a ten auction high.
GDT winning prices in butter have been historically higher than U.S. butter prices until the run-up in domestic butter prices beginning in 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 was reduced throughout the early months of 2015 but has rebounded over more recent auctions. U.S. spot butter prices are currently trading at a 76.5% premium to GDT prices while CME futures prices are trading at an 84.2% premium to GDT prices from Jul ’16 – Dec ’16. U.S. butter prices traded at an 83.3% premium to GDT butter prices over the second half of 2014 and a 53.9% premium to GDT butter prices throughout 2015.
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. U.S. cheddar cheese prices have traded at a premium to GDT prices for the majority of the bimonthly events since Jan ’14 after trading at a discount for nearly all of 2013. U.S. spot cheddar cheese prices are currently trading at a 17.6% premium to GDT prices while CME futures prices are trading at a 30.9% premium to GDT prices from Jul ’16 – Oct ’16. Cheddar cheese was not sold at the GDT auction for Contract 2 (Aug ’16), Contract 5 (Nov ’16) and Contract 6 (Dec ’16).
Oceania and Europe GDT SMP prices have converged since mid-2014 as prices have moved downward in tandem. Oceania SMP prices remained within $0.06/lb of Europe SMP prices at the Jun 15th GDT auction as both prices increased from previous levels. U.S. SMP, representing product sold by Dairy America, did not trade for the 45th straight auction after trading at 69 consecutive auctions from Oct ’11 to Aug ’14. Dairy America is currently the only U.S. seller offering SMP within the GDT as Land O’ Lakes has formally withdrawn from the global auction platform. India SMP, representing product sold by Amul, was also not sold at the Jun 15th event.
Although SMP offered by U.S. sellers has not traded since Aug ’14, the most recent U.S. / Oceania SMP price premiums experienced within the GDT auction have been the highest experienced since Sep ’12. Oceania SMP prices over short-term contract periods reached a new low at the August 4th auction prior to trending higher throughout October and then declining once again to an 18 auction low during the May 17th event. Oceania SMP rebounded to a seven auction high at the most recent auction.
U.S. NFDM spot prices are currently trading 4.2% below GDT SMP prices however U.S. NFDM prices are expected to regain a premium to GDT SMP prices during future months, as U.S. prices are trading at an 11.1% average premium to GDT prices from Jul ’15 – Dec ’15.