Behind the Market | GDT Trading Event 412

Insights from GDT's Chief Economist

Market pulse

The GDT Price Index fell 1.1% at GDT Trading Event 412 (TE412), ending four consecutive Trading Events of higher prices. Prices moved lower across supplier regions, declining 3.5% in Europe and 1.0% in Oceania.

The overall decline came alongside more varied movements across product groups. Cheddar moved sharply higher, while Butter, Mozzarella and Lactose saw declines. Skim Milk Powder (SMP) remained broadly unchanged.

A total of 42,444 MT of dairy products was sold to 126 winning bidders across 18 bidding rounds. Participation was broadly in line with the previous Trading Event, with 155 bidders taking part compared with 157 in TE411.

Price accuracy averaged 1.5% for the Trading Event, indicating a relatively small gap between the final price, where demand was at or below available supply, and the pre-final price, where demand was still in excess.

Across regions, accuracy ranged from 1.0% in Europe to 1.2% in America and 1.7% in Oceania, with the Oceania figure driven primarily by a larger gap for Cheddar. For Whole Milk Powder (WMP) and SMP, price accuracy in Oceania was 0.7% and 0.9% respectively, indicating highly accurate prices. The smaller this gap, the more precisely the auction identifies the market-clearing price.

Overall auction activity remained relatively high, with 79 of the 98 Traded Products seeing excess demand at their starting prices.

Event at a glance

The price moves that mattered most

Cheddar saw the largest price increase in TE412, rising 16.5% following a 6.6% decline in the previous Trading Event. In contrast, Butter (-5.7%), Mozzarella (-6.0%) and Lactose (-4.3%) all moved lower.

Results also varied across supplier regions. In Oceania, Cheddar increased 16.5%, while there was relatively little movement across the milk powders, with SMP rising 0.4% and WMP falling 0.8%, broadly in line with futures market expectations. Oceania-origin fat products moved lower, with Butter declining 5.7% and Anhydrous Milk Fat (AMF) falling 3.0%.

Prices also declined across Europe overall (-3.5%), with Lactose (-6.3%) and Mozzarella (-6.0%) seeing some of the largest decreases. Butter fell 4.6%, while Europe-origin WMP (+0.4%) was broadly unchanged.

Winning prices in TE412 were even more closely aligned across supplier regions than in recent Trading Events. Average prices for Oceania-origin and Europe-origin Butter were less than US$50/MT apart.

What the bidding reveals about price discovery

As prices change between rounds, demand can also shift as the auction progresses towards a market-determined price. How that demand changes as prices move can influence the size of the price movement.

TE412 provides an example in Oceania-origin WMP. Demand was relatively low, but this did not translate into a large price decline because demand remained persistent as the auction progressed. This resulted in relatively little movement in price, with Oceania-origin WMP finishing 0.8% lower.

View the latest Trading Event results here.

Disclaimer: This commentary is for general information purposes only and does not constitute financial or other advice and should not be relied on. The views expressed are based on historical auction data and other available market information which has not be independently verified. GDT is under no obligation to correct or update this commentary. This commentary is not a recommendation to participate in auctions and is not a forecast. Past results are not an indicator of future results.