Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices continued their recent declines at the Global Dairy Trade (GDT) auction held August 5th. The GDT Price Index declined 8.4% on the session, the 11th decline in the last 12 auctions. 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 began the year up 47.7% YOY but has declined of late, regressing to levels below the three year average prices and down 40.0% from the recent peak level experienced in Dec ’13. The August 5th event finished 37.4% below last year and 19.5% below the three year average GDT Price Index for the first week of August. Total quantity sold for all products reached a new high for the year, and was up 32.0% from the last event.
Price declines were widespread across the products offered at the event. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, fell 11.5% and skim milk powder (SMP) fell 6.5%. Butter, butter milk powder, cheddar cheese and rennet casein also experienced price declines. Anhydrous milkfat (AMF) experienced the only price increase, up 6.0% at the August 5th event.
Butter and cheddar cheese prices declined 9.6% and 10.2%, respectively from the previous bi-weekly auction. See the table below for 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 August 5th preliminary 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.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the first time 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. July ’14 U.S. / Oceania butter price premiums within the GDT auction were the highest ever experienced.
GDT winning prices in butter have been historically higher than U.S. butter prices until the recent run-up in domestic butter prices. Over the past 26 bi-weekly events leading up to April ’14, GDT butter prices have traded at a $0.20 average premium to U.S. butter prices. Over the past eight auctions, U.S. butter prices have traded at a $0.59 average premium to GDT butter prices, with the most recent event’s $1.17 premium being the highest over the period. Due to freight charges, duties and differences in protein standards, butter is rarely imported domestically and is not expected to in the near future despite the recent divergence in international prices.
GDT future month winning prices remain lower than CME futures prices, with Oct ’14 – Jan ’15 GDT butter trading at an average 35.0% discount to CME futures prices. Butter was not sold at the GDT auction for Contract 1 (Sep ’14) or Contract 6 (Feb ’15). GDT butter prices have traded at a 35.9% discount to U.S. butter prices since Jun ’14.
Cheddar cheese available for purchase at GDT auctions is currently offered only by Fonterra, so GDT winning prices in cheddar cheese is a viable metric for Oceania prices. GDT prices have traded at a premium to U.S. prices until recently, with U.S. prices outpacing GDT prices since Jan ’14. CME futures prices are also trading above GDT prices in future months. Cheddar cheese was not sold at the GDT auction for Contact 1 (Sep ’14), Contract 5 (Jan ’15) and Contract 6 (Feb ’15).
GDT SMP prices have seen recent convergence, with U.S., Oceania, Europe and India prices moving downward in tandem. U.S., Oceania and Europe GDT SMP prices on short-term contracts have traded within 5% of each other in every event since April prior to the two most recent events where U.S. prices strengthened slightly relative to Oceania and Europe prices. India SMP, representing product sold by Amul, was not sold for Contract 1 and Contract 2 periods since the first week of May.
Within the GDT auction, SMP offered by U.S. sellers on short-term contracts, representing product sold by Dairy America and Land O’Lakes, has recently traded at a premium to SMP offered by Oceania sellers on short-term contracts, representing product sold by Fonterra. Recent U.S. / Oceania SMP price premiums within the GDT auction have been the highest since Sep ’12. The gain in U.S. SMP prices relative to Oceania SMP prices within the GDT auction is due to a more severe decline in Oceania SMP prices in recent months. Overall, the GDT SMP Price Index fell 20.9% since the first of April, with Oceania short-term contracts falling 25.7% during the same period.
The recent run-up in domestic SMP/NFDM prices relative to GDT prices is expected to continue throughout the next few months as CME NFDM futures prices are trading at an average 10.5% premium to the GDT SMP future month winning prices from Sep ’14 – Oct ’14 when using a 25% normalized protein content. GDT SMP prices in more forward months are expected to gain on domestic prices, with Nov ’14 – Feb ’15 GDT SMP is trading at an average 4.4% premium to CME NFDM futures prices.
The GDT Price Index began the year up 47.7% YOY but has declined of late, regressing to levels below the three year average prices and down 40.0% from the recent peak level experienced in Dec ’13. The August 5th event finished 37.4% below last year and 19.5% below the three year average GDT Price Index for the first week of August. Total quantity sold for all products reached a new high for the year, and was up 32.0% from the last event.
Price declines were widespread across the products offered at the event. Whole milk powder (WMP), which accounted for over half of the GDT volume sold in 2013, fell 11.5% and skim milk powder (SMP) fell 6.5%. Butter, butter milk powder, cheddar cheese and rennet casein also experienced price declines. Anhydrous milkfat (AMF) experienced the only price increase, up 6.0% at the August 5th event.
Butter and cheddar cheese prices declined 9.6% and 10.2%, respectively from the previous bi-weekly auction. See the table below for 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 August 5th preliminary 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.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the first time 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. July ’14 U.S. / Oceania butter price premiums within the GDT auction were the highest ever experienced.
GDT winning prices in butter have been historically higher than U.S. butter prices until the recent run-up in domestic butter prices. Over the past 26 bi-weekly events leading up to April ’14, GDT butter prices have traded at a $0.20 average premium to U.S. butter prices. Over the past eight auctions, U.S. butter prices have traded at a $0.59 average premium to GDT butter prices, with the most recent event’s $1.17 premium being the highest over the period. Due to freight charges, duties and differences in protein standards, butter is rarely imported domestically and is not expected to in the near future despite the recent divergence in international prices.
GDT future month winning prices remain lower than CME futures prices, with Oct ’14 – Jan ’15 GDT butter trading at an average 35.0% discount to CME futures prices. Butter was not sold at the GDT auction for Contract 1 (Sep ’14) or Contract 6 (Feb ’15). GDT butter prices have traded at a 35.9% discount to U.S. butter prices since Jun ’14.
Cheddar cheese available for purchase at GDT auctions is currently offered only by Fonterra, so GDT winning prices in cheddar cheese is a viable metric for Oceania prices. GDT prices have traded at a premium to U.S. prices until recently, with U.S. prices outpacing GDT prices since Jan ’14. CME futures prices are also trading above GDT prices in future months. Cheddar cheese was not sold at the GDT auction for Contact 1 (Sep ’14), Contract 5 (Jan ’15) and Contract 6 (Feb ’15).
GDT SMP prices have seen recent convergence, with U.S., Oceania, Europe and India prices moving downward in tandem. U.S., Oceania and Europe GDT SMP prices on short-term contracts have traded within 5% of each other in every event since April prior to the two most recent events where U.S. prices strengthened slightly relative to Oceania and Europe prices. India SMP, representing product sold by Amul, was not sold for Contract 1 and Contract 2 periods since the first week of May.
Within the GDT auction, SMP offered by U.S. sellers on short-term contracts, representing product sold by Dairy America and Land O’Lakes, has recently traded at a premium to SMP offered by Oceania sellers on short-term contracts, representing product sold by Fonterra. Recent U.S. / Oceania SMP price premiums within the GDT auction have been the highest since Sep ’12. The gain in U.S. SMP prices relative to Oceania SMP prices within the GDT auction is due to a more severe decline in Oceania SMP prices in recent months. Overall, the GDT SMP Price Index fell 20.9% since the first of April, with Oceania short-term contracts falling 25.7% during the same period.
The recent run-up in domestic SMP/NFDM prices relative to GDT prices is expected to continue throughout the next few months as CME NFDM futures prices are trading at an average 10.5% premium to the GDT SMP future month winning prices from Sep ’14 – Oct ’14 when using a 25% normalized protein content. GDT SMP prices in more forward months are expected to gain on domestic prices, with Nov ’14 – Feb ’15 GDT SMP is trading at an average 4.4% premium to CME NFDM futures prices.