Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices increased for the sixth consecutive Global Dairy Trade (GDT) auction held March 3rd. The GDT Price Index increased 1.1% on the session to the highest price in eight months. Stabilization in prices has been experienced of late, with the GDT Price Index increasing by 26.6% over the past ten auctions since the beginning of October, 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 1.1% increase over the last event, the GDT Price Index remains down 31.3% YOY and 19.9% below the three year average price for the first auction of March.
Price gains were led by cheddar cheese, which increased 10.8% on the auction. Other price gains at the March 3rd event include butter milk powder increasing 6.8%, skim milk powder (SMP) increasing 5.9% and butter increasing 2.5%. Whole milk powder (WMP), which accounted for over half of the GDT volume over the past two years, declined for the first time in six auctions, finishing 1.0% lower. Anhydrous milkfat and rennet casein also declined on the auction, falling 2.2% and 0.7%, respectively. Sweet whey powder and lactose were not sold at the March 3rd event. U.S. SMP and butter did not trade at the event for the 14th and 15th 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 2nd 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 3rd event of 22,094 MT were 3.8% lower than the previous auction and the lowest quantities sold since May ’13. Quantities sold for all products have declined for ten 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 44.8% below last year’s average volumes sold for the month of March and 22.3% 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 15th 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.
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 – Aug ’15 CME futures prices trading at an average 4.8% 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) and Contract 6 (Sep ’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 an 11.3% 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 20 month high over Europe SMP prices. India SMP, representing product sold by Amul, traded for the third consecutive auction after being absent for the prior six auctions, and remained at significantly higher prices than Oceania and Europe SMP. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the 14th straight auction after trading at 69 consecutive auctions from Oct ’11 to Aug ’14. Fonterra offered Australian SMP on the GDT for the fourth time, with Australian medium heat SMP trading at a 5.9% discount to New Zealand medium heat SMP over the same contract period.
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 into the second half of 2015, with CME NFDM futures prices are trading at a 0.9% average discount to GDT SMP future month winning prices throughout the third quarter of 2015 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 1.1% increase over the last event, the GDT Price Index remains down 31.3% YOY and 19.9% below the three year average price for the first auction of March.
Price gains were led by cheddar cheese, which increased 10.8% on the auction. Other price gains at the March 3rd event include butter milk powder increasing 6.8%, skim milk powder (SMP) increasing 5.9% and butter increasing 2.5%. Whole milk powder (WMP), which accounted for over half of the GDT volume over the past two years, declined for the first time in six auctions, finishing 1.0% lower. Anhydrous milkfat and rennet casein also declined on the auction, falling 2.2% and 0.7%, respectively. Sweet whey powder and lactose were not sold at the March 3rd event. U.S. SMP and butter did not trade at the event for the 14th and 15th 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 2nd 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 3rd event of 22,094 MT were 3.8% lower than the previous auction and the lowest quantities sold since May ’13. Quantities sold for all products have declined for ten 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 44.8% below last year’s average volumes sold for the month of March and 22.3% 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 15th 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.
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 – Aug ’15 CME futures prices trading at an average 4.8% 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) and Contract 6 (Sep ’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 an 11.3% 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 20 month high over Europe SMP prices. India SMP, representing product sold by Amul, traded for the third consecutive auction after being absent for the prior six auctions, and remained at significantly higher prices than Oceania and Europe SMP. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the 14th straight auction after trading at 69 consecutive auctions from Oct ’11 to Aug ’14. Fonterra offered Australian SMP on the GDT for the fourth time, with Australian medium heat SMP trading at a 5.9% discount to New Zealand medium heat SMP over the same contract period.
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 into the second half of 2015, with CME NFDM futures prices are trading at a 0.9% average discount to GDT SMP future month winning prices throughout the third quarter of 2015 when using a 35% normalized protein content. SMP was not sold at the GDT auction for Contact 1 (Apr ’15).