Global Dairy Trade Results Update – 5/17/16
Executive Summary
Dairy product prices increased for the third time in the past four auctions during the GDT event held May 17th. Highlights from the most recent auction include:
• The GDT Price Index increased 2.6% at the May 17th event, finishing at the highest level experienced since the second auction of January.
• Price gains were widespread across products offered at the May 17th event with the only declines exhibited within cheddar cheese and skim milk powder, each of which declined by less than one percent. Whole milk powder prices increased for the fourth consecutive auction at the May 17th event, finishing up 3.0%.
• Total quantities sold for all products at the May 17th event remained weak, however, finishing 12.1% below the previous auction and reaching a three year low.
Additional Report Details
Dairy product prices increased for the third time in the past four events within the Global Dairy Trade (GDT) during the auction held May 17th as the GDT Price Index finished up 2.6%. 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 during mid-March but rebounded to an eight auction high during the most recent event. The GDT Price Index represents a weighted-average of the percentage changes in prices between trading events for all products offered.
Despite the recent increases in prices, the GDT Price Index finished the May 17th event 5.6% below the previous year price levels and 38.0% below the three year average price for the second auction of May. The GDT Price Index has finished lower on a YOY basis for 14 consecutive auctions through the May 17th event.
Within the latest auction, price gains were led by butter milk powder (+16.2%), followed by anhydrous milkfat (+4.9%), lactose (+3.9%), butter (+3.8%), whole milk powder (+3.0%) and rennet casein (+0.3%). Declines in prices were experienced within cheddar cheese (-0.8%) and skim milk powder (-0.9%). U.S. SMP and butter did not trade for the 43rd and 44th consecutive times, respectively, at the May 17th 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 May 16th 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 May 17th event of 18,113 MT were 12.1% less than the previous auction, finishing at a three year low.
Volumes sold for all products within the May auctions were 28.2% below last year’s average volumes sold for the month of May and 27.7% below the previous three year average May quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 44th consecutive 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, Oceania 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 Apr 5th event. Oceania butter prices over short-term contract periods increased slightly during the most recent event, finishing at a five auction high.
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 70.7% premium to GDT prices while CME futures prices are trading at a 78.9% premium to GDT prices from Jun ’16 – Nov ’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 an 8.9% premium to GDT prices while CME futures prices are trading at a 16.6% premium to GDT prices from Jun ’16 – Jul ’16. Cheddar cheese was not sold at the GDT auction for Contract 3 (Aug ’16), Contract 4 (Sep ’16), Contract 5 (Oct ’16) and Contract 6 (Nov ’16).
Oceania and Europe GDT SMP prices have converged since mid-2014 as prices have moved downward in tandem. Europe SMP prices remained within 5.0% of Oceania SMP prices at the May 3rd GDT auction, however Europe SMP prices did not trade at the most recent event. U.S. SMP, representing product sold by Dairy America, did not trade for the 43rd 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, was sold for the third consecutive auction at the May 17th event, remaining at a premium to Oceania and Europe prices.
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 over 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 an 18 auction low during the May 17th event.
U.S. NFDM spot prices are currently trading 4.6% above GDT SMP prices and a 13.0% average premium to GDT prices from Jun ’15 – Nov ’15.
Despite the recent increases in prices, the GDT Price Index finished the May 17th event 5.6% below the previous year price levels and 38.0% below the three year average price for the second auction of May. The GDT Price Index has finished lower on a YOY basis for 14 consecutive auctions through the May 17th event.
Within the latest auction, price gains were led by butter milk powder (+16.2%), followed by anhydrous milkfat (+4.9%), lactose (+3.9%), butter (+3.8%), whole milk powder (+3.0%) and rennet casein (+0.3%). Declines in prices were experienced within cheddar cheese (-0.8%) and skim milk powder (-0.9%). U.S. SMP and butter did not trade for the 43rd and 44th consecutive times, respectively, at the May 17th 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 May 16th 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 May 17th event of 18,113 MT were 12.1% less than the previous auction, finishing at a three year low.
Volumes sold for all products within the May auctions were 28.2% below last year’s average volumes sold for the month of May and 27.7% below the previous three year average May quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 44th consecutive 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, Oceania 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 Apr 5th event. Oceania butter prices over short-term contract periods increased slightly during the most recent event, finishing at a five auction high.
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 70.7% premium to GDT prices while CME futures prices are trading at a 78.9% premium to GDT prices from Jun ’16 – Nov ’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 an 8.9% premium to GDT prices while CME futures prices are trading at a 16.6% premium to GDT prices from Jun ’16 – Jul ’16. Cheddar cheese was not sold at the GDT auction for Contract 3 (Aug ’16), Contract 4 (Sep ’16), Contract 5 (Oct ’16) and Contract 6 (Nov ’16).
Oceania and Europe GDT SMP prices have converged since mid-2014 as prices have moved downward in tandem. Europe SMP prices remained within 5.0% of Oceania SMP prices at the May 3rd GDT auction, however Europe SMP prices did not trade at the most recent event. U.S. SMP, representing product sold by Dairy America, did not trade for the 43rd 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, was sold for the third consecutive auction at the May 17th event, remaining at a premium to Oceania and Europe prices.
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 over 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 an 18 auction low during the May 17th event.
U.S. NFDM spot prices are currently trading 4.6% above GDT SMP prices and a 13.0% average premium to GDT prices from Jun ’15 – Nov ’15.