Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices continued their recent declines at the Global Dairy Trade (GDT) auction held September 2nd. The GDT Price Index declined 6.0% on the session, the 13th decline in the last 14 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 below the three year average prices and down 43.9% from the recent peak level experienced in Dec ’13. The September 2nd event finished 42.2% below last year and 27.4% below the three year average GDT Price Index for the first week of September. Total quantity sold for all products was 22.9% above the previous auction and 45.4% higher than the 2014 average total quantity sold.
Price declines were widespread across all products offered at the event. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, fell 4.3% and skim milk powder (SMP) fell 9.5%. Anhydrous milkfat (-5.8%), butter (-5.6%), butter milk powder (-12.9%), cheddar cheese (-4.9%) and rennet casein (-14.3%) also experienced price declines. Lactose and sweet whey powder were not offered at the September 2nd event.
See the table below for 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 August 29th 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 third 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 26 bi-weekly events leading up to April ’14, GDT butter prices have traded at a $0.20 average premium to U.S. butter prices. Over the past ten auctions, U.S. butter prices have traded at a $0.74 average premium to GDT butter prices, with the most recent U.S. butter price premium of $1.54 being the highest over the period. Due to freight charges, duties and differences in butterfat 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 Nov ’14 – Feb ’15 GDT butter trading at an average 36.0% discount to CME futures prices. Butter was not sold at the GDT auction for Contract 1 (Oct ’14) or Contract 6 (Mar ’15). GDT butter prices have traded at a 41.6% discount to U.S. butter prices since Jun ’14.
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 since Jan ’14. CME futures prices are also trading above GDT prices in future months. Cheddar cheese was not sold at the GDT auction for Contact 1 (Oct ’14), Contract 5 (Feb ’15) and Contract 6 (Mar ’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 eight of the last eleven events. India SMP, representing product sold by Amul, was sold for short-term contract periods for the first time since the first week of May, and traded 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 second straight auction after trading at each auction since being offered in Oct ’11.
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 37.0% since the first of April, with Oceania short-term contracts falling 42.4% during the same period.
The recent run-up in domestic SMP/NFDM prices relative to GDT prices is expected to continue throughout the next few months as CME NFDM futures prices are trading at an average 19.2% premium to the GDT SMP future month winning prices from Oct ’14 – Feb ’14 when using a 35% normalized protein content. Prices are expected to converge heading into 2Q ’15, with Mar ’15 GDT SMP prices trading at a 2.0% premium to CME NFDM futures prices.
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 and down 43.9% from the recent peak level experienced in Dec ’13. The September 2nd event finished 42.2% below last year and 27.4% below the three year average GDT Price Index for the first week of September. Total quantity sold for all products was 22.9% above the previous auction and 45.4% higher than the 2014 average total quantity sold.
Price declines were widespread across all products offered at the event. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, fell 4.3% and skim milk powder (SMP) fell 9.5%. Anhydrous milkfat (-5.8%), butter (-5.6%), butter milk powder (-12.9%), cheddar cheese (-4.9%) and rennet casein (-14.3%) also experienced price declines. Lactose and sweet whey powder were not offered at the September 2nd event.
See the table below for 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 August 29th 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 third 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 26 bi-weekly events leading up to April ’14, GDT butter prices have traded at a $0.20 average premium to U.S. butter prices. Over the past ten auctions, U.S. butter prices have traded at a $0.74 average premium to GDT butter prices, with the most recent U.S. butter price premium of $1.54 being the highest over the period. Due to freight charges, duties and differences in butterfat 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 Nov ’14 – Feb ’15 GDT butter trading at an average 36.0% discount to CME futures prices. Butter was not sold at the GDT auction for Contract 1 (Oct ’14) or Contract 6 (Mar ’15). GDT butter prices have traded at a 41.6% discount to U.S. butter prices since Jun ’14.
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 since Jan ’14. CME futures prices are also trading above GDT prices in future months. Cheddar cheese was not sold at the GDT auction for Contact 1 (Oct ’14), Contract 5 (Feb ’15) and Contract 6 (Mar ’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 eight of the last eleven events. India SMP, representing product sold by Amul, was sold for short-term contract periods for the first time since the first week of May, and traded 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 second straight auction after trading at each auction since being offered in Oct ’11.
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 37.0% since the first of April, with Oceania short-term contracts falling 42.4% during the same period.
The recent run-up in domestic SMP/NFDM prices relative to GDT prices is expected to continue throughout the next few months as CME NFDM futures prices are trading at an average 19.2% premium to the GDT SMP future month winning prices from Oct ’14 – Feb ’14 when using a 35% normalized protein content. Prices are expected to converge heading into 2Q ’15, with Mar ’15 GDT SMP prices trading at a 2.0% premium to CME NFDM futures prices.