Monday, April 22, 2024

GDT plans spot market enhancement

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The Global Dairy Trade platform intends to expand next year with a spot market offering, beginning with Fonterra whole milk powder regular, contract period 2.
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GDT director Eric Hansen.

The Global Dairy Trade platform intends to expand next year with a spot market offering, beginning with Fonterra whole milk powder regular, contract period 2.

The plan is to have weekly events on alternate weeks followed by a possible move to daily auctions.

GDT director Eric Hansen said the intention is to run a streamlined and complementary version of the existing GDT Events on a more frequent basis.

“We aim to enhance liquidity in the physical and financial markets by providing more data points.

 “The intended spot volumes would begin with only 5-7% of the annual GDT throughput of WMP.

“The start time would be the same as existing GDT Events, that is 12.00 UTC (Co-ordinated Universal Time) on Tuesdays because buyers are used to that pattern.”

Hansen said the existing auctions have about 100 offers, when adding up the different products, specifications, sellers and contract periods.

The spot market would have just one product, one seller and one contract period and may take less than 30 minutes to run with five to 10 rounds of a couple of minutes each.

“We think if we can get five bidders per auction that will be a reasonably competitive market.”

The outcomes will be published on the GDT website and not initially through the GDT Insight subscription service.

Hansen said the spot market product would be subject to the same rules and regulations as GDT Events and consultation with stakeholders would precede the launch.

Speaking during the NZX Dairy Derivatives webinar, he said the quantity of dairy products sold on GDT this past 12 months had fallen by 6.8% and the bidder participation was down by 8%, when compared with the two previous years.

Skim milk powder volumes had dropped while WMP remained broadly unchanged.

There had also been a trend away from the longer contract periods in favour of the shorter ones.

SMP and butter showed the largest declines in bidder participation, with WMP again unchanged.

Total tonnage sold in the past year was 650,000 tonnes, worth approximately US$2.4billion.

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