Global Dairy Trade Results Update – 10/4/16
Executive Summary
Dairy product prices declined for the first time in six auctions during the GDT event held Oct 4th. Highlights from the most recent auction include:
• The GDT Price Index declined 3.0% at the Oct 4th event, finishing at a three auction low. The decline was the first experienced throughout the past six auctions and the largest decline experienced since Feb ’16.
• Price declines were widespread across products offered at the Oct 4th event with the exception of butter milk powder. Whole milk powder declined for the second consecutive auction, finishing down 3.8%.
• Total quantities sold for all products at the Oct 4th event declined 3.3% from the previous auction, finishing 2.7% below last year’s average volumes sold for the month of October.
Additional Report Details
Dairy product prices declined within the Global Dairy Trade (GDT) during the event held Oct 4th as the GDT Price Index finished down 3.0%. The GDT Price Index had reached an 18 month high prior to the most recent decline. 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 remained 5.8% above the previous year price levels at the Oct 4th event but finished 13.2% below the three year average price for the first auction of October. The GDT Price Index had finished lower on a YOY basis for 14 consecutive auctions prior to increasing throughout the past nine events.
Within the latest auction, price declines were widespread and led by lactose (-9.7%), followed by skim milk powder (-3.9%), whole milk powder (-3.8%), rennet casein (-3.7%), cheddar cheese (-2.3%), anhydrous milkfat (-1.0%) and butter (-0.3%). Butter milk powder was the only product to increase at the Oct 4th event, finishing up 9.3%.
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 Oct 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 Oct 4th event of 33,937 MT were 3.3% below the previous auction. GDT quantities sold typically reach seasonal highs throughout the months of August and September prior to declining over the following several months.
Volumes sold for all products within the first auction of October finished 0.1% below last year’s average volumes sold for the month of October and 23.0% below the previous three year average October quantities sold.
U.S. butter prices continue to remain at a premium to GDT winning prices through the Oct 4th event, despite GDT butter prices increasing by over 35% throughout the past two months. U.S. spot butter prices are currently trading at a 9.8% premium to GDT prices while CME futures prices are trading at a 14.3% premium to GDT prices from Nov ’16 – Apr ’17. The U.S. butter price premiums were the smallest experienced in the past 18 months. 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.
U.S. cheddar cheese futures prices also continue to remain at a premium to GDT winning prices, despite GDT cheddar cheese prices remaining near a two year high at the Oct 4th event. U.S. spot cheddar cheese prices traded 4.4% below GDT prices however CME futures prices are trading at a 3.9% premium to GDT prices from Nov ’16 – Mar ’17. Cheddar cheese was not sold at the GDT auction for Contract 6 (Apr ’17).
U.S. NFDM spot prices are currently trading 9.8% below GDT prices as GDT SMP prices remained near an 18 month high at the Oct 4th event. U.S. NFDM prices are expected to regain a premium to GDT SMP prices throughout future months, however, as U.S. prices are trading at a 1.2% average premium to GDT prices from Nov ’16 – Apr ’17.
The GDT Price Index remained 5.8% above the previous year price levels at the Oct 4th event but finished 13.2% below the three year average price for the first auction of October. The GDT Price Index had finished lower on a YOY basis for 14 consecutive auctions prior to increasing throughout the past nine events.
Within the latest auction, price declines were widespread and led by lactose (-9.7%), followed by skim milk powder (-3.9%), whole milk powder (-3.8%), rennet casein (-3.7%), cheddar cheese (-2.3%), anhydrous milkfat (-1.0%) and butter (-0.3%). Butter milk powder was the only product to increase at the Oct 4th event, finishing up 9.3%.
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 Oct 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 Oct 4th event of 33,937 MT were 3.3% below the previous auction. GDT quantities sold typically reach seasonal highs throughout the months of August and September prior to declining over the following several months.
Volumes sold for all products within the first auction of October finished 0.1% below last year’s average volumes sold for the month of October and 23.0% below the previous three year average October quantities sold.
U.S. butter prices continue to remain at a premium to GDT winning prices through the Oct 4th event, despite GDT butter prices increasing by over 35% throughout the past two months. U.S. spot butter prices are currently trading at a 9.8% premium to GDT prices while CME futures prices are trading at a 14.3% premium to GDT prices from Nov ’16 – Apr ’17. The U.S. butter price premiums were the smallest experienced in the past 18 months. 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.
U.S. cheddar cheese futures prices also continue to remain at a premium to GDT winning prices, despite GDT cheddar cheese prices remaining near a two year high at the Oct 4th event. U.S. spot cheddar cheese prices traded 4.4% below GDT prices however CME futures prices are trading at a 3.9% premium to GDT prices from Nov ’16 – Mar ’17. Cheddar cheese was not sold at the GDT auction for Contract 6 (Apr ’17).
U.S. NFDM spot prices are currently trading 9.8% below GDT prices as GDT SMP prices remained near an 18 month high at the Oct 4th event. U.S. NFDM prices are expected to regain a premium to GDT SMP prices throughout future months, however, as U.S. prices are trading at a 1.2% average premium to GDT prices from Nov ’16 – Apr ’17.