Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices fell within the Global Dairy Trade (GDT) for the second consecutive auction as the GDT Price Index declined 1.4% in the auction held January 19th. 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 most recent decline resulted in the GDT Price Index falling back to a four auction low. 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 10.5% below the previous year figures and 35.0% below the three year average price for the second auction of January.
Declines in prices were led by rennet casein (-7.8%), followed by butter (-5.9%), cheddar cheese (-3.4%), skim milk powder (-3.2%), lactose (-1.7%) and whole milk powder (-0.5%). Whole milk powder has accounted for over half of the total GDT volume over the past two years. Gains in prices were experienced in butter milk powder (+2.7%) and anhydrous milkfat (+2.4%). U.S. SMP and butter did not trade at the event for the 35th and 36th 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 January 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 January 19th event of 25,671 MT were 14.6% less than the previous auction and the lowest amount of product sold since Mar ’15.
Volumes also remained lower on a seasonal basis as total quantities sold for all products within the January auctions were 26.8% below last year’s average volumes sold for the month of January and 40.0% below the previous three year average January quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 36th 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. After declining to record lows during Aug ’15, Fonterra butter prices for short-term contract periods increased to an eight month high during the December 1st auction before declining slightly in total over more recent 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 was reduced throughout the first several weeks of 2015 but has rebounded over recent auctions. U.S. spot butter prices are currently trading at a 60.8% premium to GDT prices while CME futures prices are trading at a 66.4% premium to GDT prices from Mar ’16 – Jul ’16. U.S. butter prices traded at an 83.3% premium to GDT butter prices over the second half of 2014. Butter was not sold at the GDT auction for Contract 1 (Feb ’16).
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. U.S. spot cheddar cheese prices are currently trading at a 17.3% premium to GDT prices while CME futures prices are trading at a 24.3% premium to GDT prices from Mar ’16 – May ’16. Cheddar cheese was not sold at the GDT auction for Contract 1 (Feb ’16), Contract 5 (Jun ’16) and Contract 6 (Jul ’16).
Oceania and Europe GDT SMP prices have converged since mid-2014 as prices have moved downward in tandem. Europe SMP did not trade for the second consecutive time at the January 19th event, however EU prices at the most recently traded December 15th auction finished at a 3.9% discount to Oceania SMP prices. U.S. SMP, representing product sold by Dairy America, did not trade for the 35th 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 it was recently announced that Land O’ Lakes has formally withdrawn from the global auction platform. Land O’ Lakes first joined GDT in Mar ’14 but had not sold product via the GDT platform since Jan ’15. India SMP, representing product sold by Amul, also did not trade at the January 19th 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 for short-term contract periods reached a new low at the August 4th auction prior to the most recent increases in prices.
U.S. SMP spot prices are currently 12.5% below GDT prices however U.S. SMP prices are expected to regain a premium to GDT SMP prices on average heading into the second half of 2016. CME NFDM futures prices are trading at a 2.6% average premium to GDT SMP future month winning prices from Feb ’16 – Jul ’16 and a 7.1% premium from May ’15 – Jul ’16.
Declines in prices were led by rennet casein (-7.8%), followed by butter (-5.9%), cheddar cheese (-3.4%), skim milk powder (-3.2%), lactose (-1.7%) and whole milk powder (-0.5%). Whole milk powder has accounted for over half of the total GDT volume over the past two years. Gains in prices were experienced in butter milk powder (+2.7%) and anhydrous milkfat (+2.4%). U.S. SMP and butter did not trade at the event for the 35th and 36th 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 January 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 January 19th event of 25,671 MT were 14.6% less than the previous auction and the lowest amount of product sold since Mar ’15.
Volumes also remained lower on a seasonal basis as total quantities sold for all products within the January auctions were 26.8% below last year’s average volumes sold for the month of January and 40.0% below the previous three year average January quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 36th 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. After declining to record lows during Aug ’15, Fonterra butter prices for short-term contract periods increased to an eight month high during the December 1st auction before declining slightly in total over more recent 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 was reduced throughout the first several weeks of 2015 but has rebounded over recent auctions. U.S. spot butter prices are currently trading at a 60.8% premium to GDT prices while CME futures prices are trading at a 66.4% premium to GDT prices from Mar ’16 – Jul ’16. U.S. butter prices traded at an 83.3% premium to GDT butter prices over the second half of 2014. Butter was not sold at the GDT auction for Contract 1 (Feb ’16).
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. U.S. spot cheddar cheese prices are currently trading at a 17.3% premium to GDT prices while CME futures prices are trading at a 24.3% premium to GDT prices from Mar ’16 – May ’16. Cheddar cheese was not sold at the GDT auction for Contract 1 (Feb ’16), Contract 5 (Jun ’16) and Contract 6 (Jul ’16).
Oceania and Europe GDT SMP prices have converged since mid-2014 as prices have moved downward in tandem. Europe SMP did not trade for the second consecutive time at the January 19th event, however EU prices at the most recently traded December 15th auction finished at a 3.9% discount to Oceania SMP prices. U.S. SMP, representing product sold by Dairy America, did not trade for the 35th 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 it was recently announced that Land O’ Lakes has formally withdrawn from the global auction platform. Land O’ Lakes first joined GDT in Mar ’14 but had not sold product via the GDT platform since Jan ’15. India SMP, representing product sold by Amul, also did not trade at the January 19th 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 for short-term contract periods reached a new low at the August 4th auction prior to the most recent increases in prices.
U.S. SMP spot prices are currently 12.5% below GDT prices however U.S. SMP prices are expected to regain a premium to GDT SMP prices on average heading into the second half of 2016. CME NFDM futures prices are trading at a 2.6% average premium to GDT SMP future month winning prices from Feb ’16 – Jul ’16 and a 7.1% premium from May ’15 – Jul ’16.