Executive Summary

Dairy product prices continued to decline during the GDT auction held May 3^rd. Highlights from the most recent auction include:

• The GDT Price Index declined 8.5% at the May 3^rd event, finishing lower for the fourth consecutive auction and returning to a four month low level. The decline in the GDT Price Index was the largest experienced throughout the past six and a half years. The GDT Price Index remained at a nine year high seasonal level, however.
• Declines in prices within the May 3^rd auction were widespread across products offered for the second consecutive event and led by butter. Butter prices declined to a five month low level while whole milk powder prices declined to a four month low level and cheddar cheese and skim milk powder prices each declined to three month low levels.
• Total quantities sold for all products at the May 3^rd event finished 14.3% above previous year levels, increasing on a YOY basis for the first time in the past five auctions. Volumes sold for all products are on pace to reach a seven year high seasonal level for the month of May.

Additional Report Details

Dairy product prices declined 8.5% within the Global Dairy Trade (GDT) event held May 3^rd, finishing lower for the fourth consecutive auction and returning to a four month low level. The decline in the GDT Price Index was the largest experienced throughout the past six and a half years. The GDT Price Index had increased over 13 of 14 auctions through the first auction of March, prior to declining over the four most recent events. 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 7.0% above previous year price levels at the May 3^rd auction, reaching a nine year high seasonal level. The GDT Price Index finished 26.5% above the three year average price for the first auction of May, remaining above three year average figures for the 36^th consecutive event.

Within the latest auction, declines in prices were widespread across products offered for the second consecutive event and led by butter (-12.5%), followed by anhydrous milkfat (-12.1%), cheddar cheese (-8.6%), whole milk powder (-6.5%), skim milk powder (-6.5%) and butter milk powder (-6.1%). Lactose and sweet whey powder were not sold at the May 3^rd event. Whole milk powder and skim milk powder combined to account for 79% of all products traded within GDT events throughout the 2021 calendar year.

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 skim milk powder (SMP) has been adjusted to 35% protein content (equivalent to U.S. nonfat dry milk) in the $/lb columns below. CME spot and average futures prices are based on May 2^nd 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 3^rd event increased 13.5% from the previous auction, reaching a two month high level and finishing 14.3% above previous year figures. The YOY increase in total quantities sold was the first experienced throughout the past five auctions. Total quantities sold typically reach seasonal high levels throughout the month of November, prior to declining throughout the next several months.

Volumes sold for all products within the first auction of May increased 15.2% from average April volumes while finishing 16.6% above last year’s average volumes sold for the month of May. Volumes sold for all products are on pace to reach a seven year high seasonal level for the month of May.

U.S. butter prices finished at a premium to GDT winning prices at the May 3^rd event when accounting for differences in butterfat levels as GDT butter prices declined to a five month low level. U.S. spot butter prices are currently trading at a 3.8% premium to GDT prices while CME futures prices traded at a 1.2% premium to GDT prices from Jun ’22 – Oct ’22. Butter was not sold for Contract Period 6 (Nov ’22).

U.S. cheddar cheese prices remained at a discount to GDT winning prices at the May 3^rd event, despite GDT cheddar cheese prices declining to a three month low level. U.S. spot cheddar cheese prices are currently trading at a 9.4% discount to GDT prices while CME futures prices traded at a 10.4% discount to GDT prices from Jun ’22 – Nov ’22. Cheddar cheese was not sold for Contract Period 3 (Aug ’22) and Contract Period 5 (Oct ’22).

U.S. nonfat dry milk futures prices remained at a discount to GDT skim milk powder winning prices at the May 3^rd event when accounting for differences in protein values, despite GDT skim milk powder prices declining to a three month low level. U.S. spot nonfat dry milk prices are currently trading at a 9.3% discount to GDT skim milk powder prices while CME futures prices traded at an 8.9% discount to GDT skim milk powder prices from Jun ’22 – Oct ’22. Skim milk powder was not sold for Contract Period 6 (Nov ’22).

GDT equivalent Class III and Class IV milk prices reached values of $27.08/cwt and $25.30/cwt, respectively, throughout the first auction of May based on GDT butter, cheddar cheese and skim milk powder prices. The GDT equivalent Class III and Class IV prices each reached four month low levels.

GDT equivalent Class III and Class IV milk prices are currently trading at premiums of $2.85/cwt and $0.85/cwt, respectively, vs. U.S. price levels.