Global Dairy Trade Results Update – 4/5/16
Executive Summary
Dairy product prices increased for the second time within the past three auctions during the GDT event held April 5th. Highlights from the most recent auction include:
• The GDT Price Index increased by 2.1% at the April 5th event, which was the largest percentage gain experienced in the past four months.
• Increases in prices were fairly widespread across products offered during the April 5th auction. Rennet casein, cheddar cheese, anhydrous milkfat, lactose, whole milk powder and skim milk powder prices all increased throughout the event.
• Total quantities sold for all products at the April 5th event were 11.2% greater than the 12 month low experienced during the previous auction but remained 7.0% lower on a YOY basis.
Additional Report Details
Dairy product prices increased within the Global Dairy Trade (GDT) during the auction held April 5th as the GDT Price Index finished 2.1% higher. The 2.1% increase was the largest percentage gain experienced in the past four months. 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 GDT Price Index had fallen back to a 14 auction low prior to the most recent gain in prices. The GDT Price Index represents a weighted-average of the percentage changes in prices between trading events for all products offered.
Despite increasing in price from the previous auction, the GDT Price Index finished the April 5th event 18.3% below the previous year and 45.8% below the three year average price for the first auction of April. The GDT Price Index has finished lower on a YOY basis for 11 consecutive events through April 5th.
Increases in prices were fairly widespread and led by rennet casein (+11.8%), followed by cheddar cheese (+10.5%), anhydrous milkfat (+6.7%), lactose (+6.2%), whole milk powder (+1.5%) and skim milk powder (+0.1%). Declines in prices were experienced in butter (-2.0%) and butter milk powder (-8.2%). U.S. SMP and butter did not trade for the 40th and 41st consecutive times, respectively, at the April 5th event.
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 April 3rd 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 April 5th event of 22,682 MT were 11.2% greater than the 12 month low experienced during the previous auction but remained lower on a YOY basis.
Volumes sold for all products within the first auction of April were 7.0% below last year’s average volumes sold for the month of April and 11.6% below the previous three year average April quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 41st 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 once again declining to a ten auction low during the most recent event.
GDT winning prices in butter have been historically higher than U.S. butter prices until the run-up in domestic butter prices beginning in 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 early months of 2015 but has rebounded over more recent auctions. U.S. spot butter prices are currently trading at a 63.9% premium to GDT prices while CME futures prices are trading at a 70.9% premium to GDT prices from May ’16 – Oct ’16. U.S. butter prices traded at an 83.3% premium to GDT butter prices over the second half of 2014 and a 53.9% premium to GDT butter prices throughout 2015.
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. U.S. cheddar cheese prices have traded at a premium to GDT prices for the majority of the bimonthly events since Jan ’14 after trading at a discount for nearly all of 2013. U.S. spot cheddar cheese prices are currently trading at a 14.9% premium to GDT prices while CME futures prices are trading at a 23.3% premium to GDT prices from May ’16 – Jul ’16. Cheddar cheese was not sold at the GDT auction for Contract 4 (Aug ’16), Contract 5 (Sep ’16) and Contract 6 (Oct ’16).
Oceania and Europe GDT SMP prices have converged since mid-2014 as prices have moved downward in tandem. Europe SMP traded for the first time in seven auctions at the April 5th event for short-term contract periods, finishing 5.8% higher than Oceania SMP prices. U.S. SMP, representing product sold by Dairy America, did not trade for the 40th 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 Land O’ Lakes has formally withdrawn from the global auction platform. India SMP, representing product sold by Amul, also did not trade at the April 5th 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 trending higher throughout October and then declining once again to a 14 auction low during the April 5th event.
U.S. NFDM spot prices are currently trading 10.7% below GDT SMP prices however U.S. NFDM prices are expected to regain a slight premium to GDT SMP prices during future months, as U.S. prices are trading at a 0.5% average premium to GDT prices from May ’15 – Oct ’15.
Despite increasing in price from the previous auction, the GDT Price Index finished the April 5th event 18.3% below the previous year and 45.8% below the three year average price for the first auction of April. The GDT Price Index has finished lower on a YOY basis for 11 consecutive events through April 5th.
Increases in prices were fairly widespread and led by rennet casein (+11.8%), followed by cheddar cheese (+10.5%), anhydrous milkfat (+6.7%), lactose (+6.2%), whole milk powder (+1.5%) and skim milk powder (+0.1%). Declines in prices were experienced in butter (-2.0%) and butter milk powder (-8.2%). U.S. SMP and butter did not trade for the 40th and 41st consecutive times, respectively, at the April 5th event.
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 April 3rd 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 April 5th event of 22,682 MT were 11.2% greater than the 12 month low experienced during the previous auction but remained lower on a YOY basis.
Volumes sold for all products within the first auction of April were 7.0% below last year’s average volumes sold for the month of April and 11.6% below the previous three year average April quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 41st 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 once again declining to a ten auction low during the most recent event.
GDT winning prices in butter have been historically higher than U.S. butter prices until the run-up in domestic butter prices beginning in 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 early months of 2015 but has rebounded over more recent auctions. U.S. spot butter prices are currently trading at a 63.9% premium to GDT prices while CME futures prices are trading at a 70.9% premium to GDT prices from May ’16 – Oct ’16. U.S. butter prices traded at an 83.3% premium to GDT butter prices over the second half of 2014 and a 53.9% premium to GDT butter prices throughout 2015.
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. U.S. cheddar cheese prices have traded at a premium to GDT prices for the majority of the bimonthly events since Jan ’14 after trading at a discount for nearly all of 2013. U.S. spot cheddar cheese prices are currently trading at a 14.9% premium to GDT prices while CME futures prices are trading at a 23.3% premium to GDT prices from May ’16 – Jul ’16. Cheddar cheese was not sold at the GDT auction for Contract 4 (Aug ’16), Contract 5 (Sep ’16) and Contract 6 (Oct ’16).
Oceania and Europe GDT SMP prices have converged since mid-2014 as prices have moved downward in tandem. Europe SMP traded for the first time in seven auctions at the April 5th event for short-term contract periods, finishing 5.8% higher than Oceania SMP prices. U.S. SMP, representing product sold by Dairy America, did not trade for the 40th 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 Land O’ Lakes has formally withdrawn from the global auction platform. India SMP, representing product sold by Amul, also did not trade at the April 5th 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 trending higher throughout October and then declining once again to a 14 auction low during the April 5th event.
U.S. NFDM spot prices are currently trading 10.7% below GDT SMP prices however U.S. NFDM prices are expected to regain a slight premium to GDT SMP prices during future months, as U.S. prices are trading at a 0.5% average premium to GDT prices from May ’15 – Oct ’15.