By Alexandria Winning-Browne, NZX analyst
Global Dairy Trade (GDT) 320 GDT price index rebounded, up 2.4% from the previous event, with an average price achieved of US$3623/t. This result was relatively surprising, with expectations from the derivatives market and actual results differing. Thus, there is concern around the potential that this result is a technical bounce before prices keep easing. What was evident was increased demand at this event, with all commodities except for cheddar having an increased supply:demand ratio compared to the last three auctions.
So, what happened last week in dairy?
Milk powders
Milk powders had a positive auction, with increases for both whole milk powder (WMP) and skim milk powder (SMP). WMP increased 3.1% to an average of US$3397/t. Bidding round information showed more demand arrived for WMP compared to the last event. The WMP supply:demand ratio started at 2.5, taking eight rounds to drop below 1.25. The increase settled the November WMP future US$45/t higher than anticipated.
SMP prices increased 3.1% to an average of US$3057, bringing the average price back over US$3000/t. NZ SMP sold at a premium of US$34/t to EU SMP in C2; Dairy America also returned to the SMP sell side. North American SMP set prices in contracts two through four, with C2 medium heat selling at a US$69/t deficit to the NZ price achieved. Despite the increase, C2 medium heat SMP ever so slightly undershot SGX-NZX Dairy Derivatives expectations at this event, albeit achieving relatively good convergence at only US$8/t less than anticipated.
Cream Group
Milk fats produced varied results at this auction, with anhydrous milk fat (AMF) prices increasing while butter prices declined. This auction achieved price parity for milk fat values between the two commodities; the first time this has occurred since November 2021. The AMF price index increased 2.7% to finish the auction at an average US$5711/t. AMF was offered across all six contracts, with contracts two through six experiencing increases – a 180-degree shift from the direction of the last event. Butter on the other hand declined 0.8% to an average winning price of US$4829/t. Despite the decline, bidding round information showed increased demand compared to the previous auction with the demand:supply ratio remaining at 2.0 for three rounds before taking 10 rounds to drop below 1.25.
Cheddar
Cheddar prices also declined, countering any gains made at the last GDT event. The cheddar price index declined 1.3%, with the average winning price settling at US$4746/t. GDT cheddar continues to trade in a range bound fashion; cheese remains a high-value stream return.
Regional buying activity
From a regional buying perspective, there was little surprise. China continues to dominate SMP, butter and cheddar purchases, while stepping back from WMP volumes. Southeast Asia continues to consume the WMP volumes that China does not, while also dominating AMF purchases. The Middle East has continued to buy solid volumes of WMP and butter. Surprisingly, African butter purchases halved at this event compared to the last, and despite their recent involvement in the auctions, North America were absent from purchases this time round.
