Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices continued their recent declines at the Global Dairy Trade (GDT) auction held July 15th. The GDT Price Index declined 8.9% on the session, the tenth decline in the last eleven auctions and the largest decline since April ’12. 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. The July 15th event finished 33.2% below last year and 12.9% below the three year average GDT Price Index for the second week of July. Total quantity sold for all products was down 11.7% from last event, with the majority of the decline due to less product being made available to bidders. Maximum supply, a measure of the upper bound of the quantities sellers wish to sell in the trading event, declined 11.0%, from 43,249 MT to 38,483 MT.
Price declines were experienced across all products offered at the event. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, fell 10.9%, anhydrous milk fat (AMF) fell 10.0% and skim milk powder (SMP) fell 7.1%. Butter, butter milk powder, cheddar cheese and rennet casein also experienced price declines at the July 15th event.
Butter and cheddar cheese prices declined 1.1% and 1.6%, respectively from the previous bi-weekly auction. See the table below for a summary of the most recent GDT auction results 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 July 14th figures. CME average futures prices are weighted average prices based on the percentage of the total quantity sold in each GDT contract period.
Within the GDT auction, butter offered by U.S. sellers for short-term contract periods, representing product sold by Dairy America, has recently traded at a 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. Fonterra butter was first offered on GDT in Feb ’13, with Dairy America butter being first offered in Jul ’13.
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 premium to U.S. butter prices. Over the past six auctions, U.S. butter prices have traded at a $0.51 premium to GDT butter prices, with the most recent event’s $0.89 premium being the highest over the period. Due to freight charges, duties and differences in protein 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 Aug ’14 – Dec ’14 GDT butter trading at an average 34.1% discount to CME futures prices and a 44.3% discount from Sep ’14 – Dec ‘14. The relatively high Aug ’14 GDT price was due to Dairy America selling Contract 1 butter, with Fonterra selling the rest of the forward month contracts. Butter was not sold at the GDT auction for Contract 6 (Jan ’15). GDT butter prices have traded at a 31.7% discount to U.S. butter prices since April ’14.
Note: The relatively high Aug ’14 GDT price was due to Dairy America selling Contract 1 butter, with Fonterra selling the rest of the forward month contracts.
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 Feb ’14. CME futures prices are also trading above GDT prices in the majority of future months. Cheddar cheese was not sold at the GDT auction for Contact 1 (Aug ’14), Contract 5 (Dec ’14) and Contract 6 (Jan ’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 every event since April prior to the July 15th event where U.S. prices strengthened slightly relative to Oceania and Europe prices. India SMP, representing product sold by Amul, was not sold for Contract 1 and Contract 2 periods since the first week of May.
Within the GDT auction, SMP offered by U.S. sellers on short-term contracts, representing product sold by Dairy America and Land O’Lakes, 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 September 2012. 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 15.4% since the first of April, with Oceania short-term contracts falling 19.7% during the same period.
The recent run-up in domestic SMP/NFDM prices relative to GDT SMP prices is expected to be short-lived, with the average CME futures prices trading at a slight discount to the average GDT future month winning prices. Nov ’14 – Jan ’15 GDT SMP is trading at an average 3.5% premium to CME NFDM futures prices when using a 35% normalized protein content.
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. The July 15th event finished 33.2% below last year and 12.9% below the three year average GDT Price Index for the second week of July. Total quantity sold for all products was down 11.7% from last event, with the majority of the decline due to less product being made available to bidders. Maximum supply, a measure of the upper bound of the quantities sellers wish to sell in the trading event, declined 11.0%, from 43,249 MT to 38,483 MT.
Price declines were experienced across all products offered at the event. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, fell 10.9%, anhydrous milk fat (AMF) fell 10.0% and skim milk powder (SMP) fell 7.1%. Butter, butter milk powder, cheddar cheese and rennet casein also experienced price declines at the July 15th event.
Butter and cheddar cheese prices declined 1.1% and 1.6%, respectively from the previous bi-weekly auction. See the table below for a summary of the most recent GDT auction results 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 July 14th figures. CME average futures prices are weighted average prices based on the percentage of the total quantity sold in each GDT contract period.
Within the GDT auction, butter offered by U.S. sellers for short-term contract periods, representing product sold by Dairy America, has recently traded at a 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. Fonterra butter was first offered on GDT in Feb ’13, with Dairy America butter being first offered in Jul ’13.
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 premium to U.S. butter prices. Over the past six auctions, U.S. butter prices have traded at a $0.51 premium to GDT butter prices, with the most recent event’s $0.89 premium being the highest over the period. Due to freight charges, duties and differences in protein 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 Aug ’14 – Dec ’14 GDT butter trading at an average 34.1% discount to CME futures prices and a 44.3% discount from Sep ’14 – Dec ‘14. The relatively high Aug ’14 GDT price was due to Dairy America selling Contract 1 butter, with Fonterra selling the rest of the forward month contracts. Butter was not sold at the GDT auction for Contract 6 (Jan ’15). GDT butter prices have traded at a 31.7% discount to U.S. butter prices since April ’14.
Note: The relatively high Aug ’14 GDT price was due to Dairy America selling Contract 1 butter, with Fonterra selling the rest of the forward month contracts.
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 Feb ’14. CME futures prices are also trading above GDT prices in the majority of future months. Cheddar cheese was not sold at the GDT auction for Contact 1 (Aug ’14), Contract 5 (Dec ’14) and Contract 6 (Jan ’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 every event since April prior to the July 15th event where U.S. prices strengthened slightly relative to Oceania and Europe prices. India SMP, representing product sold by Amul, was not sold for Contract 1 and Contract 2 periods since the first week of May.
Within the GDT auction, SMP offered by U.S. sellers on short-term contracts, representing product sold by Dairy America and Land O’Lakes, 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 September 2012. 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 15.4% since the first of April, with Oceania short-term contracts falling 19.7% during the same period.
The recent run-up in domestic SMP/NFDM prices relative to GDT SMP prices is expected to be short-lived, with the average CME futures prices trading at a slight discount to the average GDT future month winning prices. Nov ’14 – Jan ’15 GDT SMP is trading at an average 3.5% premium to CME NFDM futures prices when using a 35% normalized protein content.