Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices increased for only the third time in the last 21 sessions at the Global Dairy Trade (GDT) auction held December 16th. The GDT Price Index increased 2.4% on the session which was the largest percentage gain YTD. Stabilization in prices has been experienced of late, with the GDT Price Index down only 0.7% over the past five 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 the year up 47.7% YOY but has declined throughout much of the year, recently regressing to levels not experienced since Aug ’09. Despite the 2.4% increase over the last event, the GDT Price Index remains down 48.4% YOY and 34.9% below the three year average price for the second week of December.
Price increases were led by butter products, with anhydrous milkfat prices up 10.8% and butter prices up 10.4%. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, increased 1.4% while rennet casein increased 4.5%. Butter milk powder (-9.5%), skim milk powder (-3.2%) and cheddar cheese (-0.6%) declined on the session. Lactose and sweet whey powder were not sold at the December 16th event. U.S. SMP and butter did not trade at the event for the ninth and tenth 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 December 15th 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 December 16th event of 35,390 MT were 9.9% lower than the previous auction. Quantities sold for all products have declined for five 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 Dec ’14 events were 25.2% below last year’s volumes and 19.0% below the previous three year average December quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the tenth 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 begun to reverse trend, increasing by a total of 26.1% over the past three auctions.
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 27 bi-weekly events leading up to April ’14, GDT butter prices have traded at a $0.19 average premium to U.S. butter prices. Over the past 18 auctions, U.S. butter prices have traded at a $0.92 average premium to GDT butter prices, however the most recent U.S. butter price premium of $0.54 is at a 14 week low. Due to freight charges, duties and differences in butterfat standards, butter is rarely imported domestically; however anecdotal evidence suggests that some butter and processed butterfat has been imported.
GDT future month winning prices remain lower than CME futures prices, with Feb ’15 – May ’15 CME futures prices trading at an average 20.3% premium to GDT prices. U.S. butter prices have traded at an 83.3% premium to GDT butter prices since Jun ’14. Butter was not sold at the GDT auction for Contract 1 (Jan ’15) and Contract 6 (Jun ’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 16.4% to GDT prices. Cheddar cheese was not sold at the GDT auction for Contact 1 (Jan ’15), Contract 5 (May ’15) and Contract 6 (Jun ’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 18 events. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the ninth 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. 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 43.2% since the first of April, with Oceania short-term contracts falling 46.2% over the same period. SMP was not sold at the GDT auction for Contact 1 (Jan ’15).
The recent run-up in domestic SMP/NFDM prices relative to GDT prices is expected to continue into Q1 ’15. CME NFDM futures prices are trading at an average 8.3% premium to GDT SMP future month winning prices when using a 35% normalized protein content, however prices are expected to converge heading into Q2 ’15. CME NFDM futures prices are trading at an average 1.5% premium to GDT SMP future month winning prices in Q2 ’15, with GDT SMP future month winning prices exceeding CME NFDM futures prices by 0.4% in Jun ’15.
The GDT Price Index began the year up 47.7% YOY but has declined throughout much of the year, recently regressing to levels not experienced since Aug ’09. Despite the 2.4% increase over the last event, the GDT Price Index remains down 48.4% YOY and 34.9% below the three year average price for the second week of December.
Price increases were led by butter products, with anhydrous milkfat prices up 10.8% and butter prices up 10.4%. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, increased 1.4% while rennet casein increased 4.5%. Butter milk powder (-9.5%), skim milk powder (-3.2%) and cheddar cheese (-0.6%) declined on the session. Lactose and sweet whey powder were not sold at the December 16th event. U.S. SMP and butter did not trade at the event for the ninth and tenth 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 December 15th 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 December 16th event of 35,390 MT were 9.9% lower than the previous auction. Quantities sold for all products have declined for five 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 Dec ’14 events were 25.2% below last year’s volumes and 19.0% below the previous three year average December quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the tenth 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 begun to reverse trend, increasing by a total of 26.1% over the past three auctions.
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 27 bi-weekly events leading up to April ’14, GDT butter prices have traded at a $0.19 average premium to U.S. butter prices. Over the past 18 auctions, U.S. butter prices have traded at a $0.92 average premium to GDT butter prices, however the most recent U.S. butter price premium of $0.54 is at a 14 week low. Due to freight charges, duties and differences in butterfat standards, butter is rarely imported domestically; however anecdotal evidence suggests that some butter and processed butterfat has been imported.
GDT future month winning prices remain lower than CME futures prices, with Feb ’15 – May ’15 CME futures prices trading at an average 20.3% premium to GDT prices. U.S. butter prices have traded at an 83.3% premium to GDT butter prices since Jun ’14. Butter was not sold at the GDT auction for Contract 1 (Jan ’15) and Contract 6 (Jun ’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 16.4% to GDT prices. Cheddar cheese was not sold at the GDT auction for Contact 1 (Jan ’15), Contract 5 (May ’15) and Contract 6 (Jun ’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 18 events. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the ninth 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. 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 43.2% since the first of April, with Oceania short-term contracts falling 46.2% over the same period. SMP was not sold at the GDT auction for Contact 1 (Jan ’15).
The recent run-up in domestic SMP/NFDM prices relative to GDT prices is expected to continue into Q1 ’15. CME NFDM futures prices are trading at an average 8.3% premium to GDT SMP future month winning prices when using a 35% normalized protein content, however prices are expected to converge heading into Q2 ’15. CME NFDM futures prices are trading at an average 1.5% premium to GDT SMP future month winning prices in Q2 ’15, with GDT SMP future month winning prices exceeding CME NFDM futures prices by 0.4% in Jun ’15.