Global Dairy Trade Results Update – GDT Price Index…
Dairy product prices increased for the fifth consecutive Global Dairy Trade (GDT) auction held February 17th. The GDT Price Index increased 10.1% on the session to the highest price in seven months. The 10.1% increase from the previous event was the largest percentage increase in 22 months. Stabilization in prices has been experienced of late, with the GDT Price Index increasing by 25.2% over the past nine auctions since the beginning of October, although total volume sold has been below historical norms over much of the period. 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 2014 up 47.7% YOY but declined throughout much of the year, regressing to levels not experienced since Aug ’09 in early December. Despite the 10.1% increase over the last event, the GDT Price Index remains down 34.8% YOY and 19.4% below the three year average price for the second auction of February.
Price gains were widespread across products offered and led by cheddar cheese, which increased 16.8% on the auction. Whole milk powder (WMP), which accounted for over half of the GDT volume over the past two years, remained strong, increasing 13.7%, while anhydrous milkfat increased 6.4%, skim milk powder (SMP) increased 5.7%, butter milk powder increased 1.9%, rennet casein increased 1.2% and butter increased 1.1%. Sweet whey powder and lactose were not sold at the February 17th event. U.S. SMP and butter did not trade at the event for the 13th and 14th straight times, respectively.
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 February 13th 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 February 17th event of 22,957 MT were 18.0% lower than the previous auction and the lowest quantities sold since May ’13. Quantities sold for all products have declined for nine consecutive auctions since the beginning of October.
Quantities sold for all products have also trended lower on a seasonal basis. Total quantities sold for all products within February auctions were 27.2% below last year’s average volumes sold for the month of February and 24.4% below the previous three year average February quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 14th 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. Fonterra butter prices for short-term contract periods continued to decline through October but have reversed trend, increasing by a total of 50.3% over the past seven auctions, despite declining by 1.9% within the Feb 17th auction.
GDT winning prices in butter have been historically higher than U.S. butter prices until the run-up in domestic butter prices over much of 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 has been reduced in recent weeks, with U.S. and GDT butter prices trading at largely similar values since the beginning of 2015.
GDT future month winning prices remain lower than CME futures prices, with Apr ’15 – Jul ’15 CME futures prices trading at an average 5.8% premium to GDT prices. U.S. butter prices traded at an 83.3% premium to GDT butter prices from Jun ’14 – Dec ’14. Butter was not sold at the GDT auction for Contract 1 (Mar ’15) and Contract 6 (Aug ’15).
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 traded at a premium to U.S. prices for most of 2013, with U.S. prices outpacing GDT prices for the majority of the bimonthly events since Jan ’14. CME futures prices are also trading above GDT prices in future months, with CME futures prices trading at a 15.5% average premium to GDT prices. Cheddar cheese was not sold at the GDT auction for Contact 1 (Mar ’15), Contract 5 (Jul ’15) and Contract 6 (Aug ’15).
GDT SMP prices have converged since the beginning of the year, with Oceania and Europe prices moving downward in tandem. Oceania and Europe GDT SMP prices on short-term contracts traded within 5% of each other in 13 of the 16 events from Apr ’14 – Nov ’14. Oceania SMP regained premiums upwards of 13.0% on Europe SMP throughout Dec ’14 and Jan ’15, but has recently come in line with Europe SMP prices again in Feb ’15, trading at only a 2.2% premium. India SMP, representing product sold by Amul, traded for the second consecutive auction after being absent for the prior six auctions, and remained at significantly higher prices than Oceania and Europe SMP. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the 13th straight auction after trading at 69 consecutive auctions from Oct ’11 to Aug ’14. Fonterra offered Australian SMP on the GDT for the third time, with Australian medium heat SMP trading at a 7.9% discount to New Zealand medium heat SMP over the same contract period.
Within the GDT auction, SMP offered by U.S. sellers on short-term contracts has recently traded at a premium to SMP offered by Oceania sellers on short-term contracts, representing product sold by Fonterra. The most recent U.S. / Oceania SMP price premiums experienced within the GDT auction have been the highest since Sep ’12. Oceania SMP prices continued to decline through much of 2014 but have rebounded off of lows experienced in late Nov ’14 and are currently trading at a premium to CME NFDM futures prices.
GDT and U.S. SMP prices are expected to converge throughout the following several months, as CME NFDM futures prices are trading at a 0.7% average discount to GDT SMP future month winning prices when using a 35% normalized protein content. SMP was not sold at the GDT auction for Contact 1 (Mar ’15).
The GDT Price Index began 2014 up 47.7% YOY but declined throughout much of the year, regressing to levels not experienced since Aug ’09 in early December. Despite the 10.1% increase over the last event, the GDT Price Index remains down 34.8% YOY and 19.4% below the three year average price for the second auction of February.
Price gains were widespread across products offered and led by cheddar cheese, which increased 16.8% on the auction. Whole milk powder (WMP), which accounted for over half of the GDT volume over the past two years, remained strong, increasing 13.7%, while anhydrous milkfat increased 6.4%, skim milk powder (SMP) increased 5.7%, butter milk powder increased 1.9%, rennet casein increased 1.2% and butter increased 1.1%. Sweet whey powder and lactose were not sold at the February 17th event. U.S. SMP and butter did not trade at the event for the 13th and 14th straight times, respectively.
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 February 13th 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 February 17th event of 22,957 MT were 18.0% lower than the previous auction and the lowest quantities sold since May ’13. Quantities sold for all products have declined for nine consecutive auctions since the beginning of October.
Quantities sold for all products have also trended lower on a seasonal basis. Total quantities sold for all products within February auctions were 27.2% below last year’s average volumes sold for the month of February and 24.4% below the previous three year average February quantities sold.
Within the GDT auction, butter offered by U.S. sellers, representing product sold by Dairy America, did not trade for the 14th 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. Fonterra butter prices for short-term contract periods continued to decline through October but have reversed trend, increasing by a total of 50.3% over the past seven auctions, despite declining by 1.9% within the Feb 17th auction.
GDT winning prices in butter have been historically higher than U.S. butter prices until the run-up in domestic butter prices over much of 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 has been reduced in recent weeks, with U.S. and GDT butter prices trading at largely similar values since the beginning of 2015.
GDT future month winning prices remain lower than CME futures prices, with Apr ’15 – Jul ’15 CME futures prices trading at an average 5.8% premium to GDT prices. U.S. butter prices traded at an 83.3% premium to GDT butter prices from Jun ’14 – Dec ’14. Butter was not sold at the GDT auction for Contract 1 (Mar ’15) and Contract 6 (Aug ’15).
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 traded at a premium to U.S. prices for most of 2013, with U.S. prices outpacing GDT prices for the majority of the bimonthly events since Jan ’14. CME futures prices are also trading above GDT prices in future months, with CME futures prices trading at a 15.5% average premium to GDT prices. Cheddar cheese was not sold at the GDT auction for Contact 1 (Mar ’15), Contract 5 (Jul ’15) and Contract 6 (Aug ’15).
GDT SMP prices have converged since the beginning of the year, with Oceania and Europe prices moving downward in tandem. Oceania and Europe GDT SMP prices on short-term contracts traded within 5% of each other in 13 of the 16 events from Apr ’14 – Nov ’14. Oceania SMP regained premiums upwards of 13.0% on Europe SMP throughout Dec ’14 and Jan ’15, but has recently come in line with Europe SMP prices again in Feb ’15, trading at only a 2.2% premium. India SMP, representing product sold by Amul, traded for the second consecutive auction after being absent for the prior six auctions, and remained at significantly higher prices than Oceania and Europe SMP. U.S. SMP, representing product sold by Dairy America and Land O’Lakes, did not trade for the 13th straight auction after trading at 69 consecutive auctions from Oct ’11 to Aug ’14. Fonterra offered Australian SMP on the GDT for the third time, with Australian medium heat SMP trading at a 7.9% discount to New Zealand medium heat SMP over the same contract period.
Within the GDT auction, SMP offered by U.S. sellers on short-term contracts has recently traded at a premium to SMP offered by Oceania sellers on short-term contracts, representing product sold by Fonterra. The most recent U.S. / Oceania SMP price premiums experienced within the GDT auction have been the highest since Sep ’12. Oceania SMP prices continued to decline through much of 2014 but have rebounded off of lows experienced in late Nov ’14 and are currently trading at a premium to CME NFDM futures prices.
GDT and U.S. SMP prices are expected to converge throughout the following several months, as CME NFDM futures prices are trading at a 0.7% average discount to GDT SMP future month winning prices when using a 35% normalized protein content. SMP was not sold at the GDT auction for Contact 1 (Mar ’15).