Insights from GDT's Chief Economist
The GDT Price Index increased 1.2% at GDT Trading Event 413 (TE413), reversing the 1.1% decline in the previous Trading Event and returning the index to slightly above its TE411 level.
Prices moved higher across supplier regions, increasing 1.5% in Europe and 1.2% in Oceania. Product group movements were more varied, with Skim Milk Powder (SMP) and Whole Milk Powder (WMP) moving higher while Lactose, Mozzarella and Cheddar declined.
A total of 41,692 MT of dairy products was sold to 124 winning bidders across 18 bidding rounds. Participation increased to 165 bidders from 155 in the previous Trading Event.
Price accuracy averaged 1.1% for the Trading Event, compared with 1.5% in TE412, 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.
Auction activity was also relatively high, with 84 of the 101 Traded Products seeing excess demand at their starting prices.
|
Indicator |
Result |
|
GDT Price Index |
+1.2% |
|
Average winning price |
€3,506/MT |
|
Quantity sold |
41,692 MT |
|
Winning bidders |
124 |
|
Participating bidders |
165 |
|
Bidding rounds |
18 |
|
Largest increase |
SMP +4.3% |
|
Largest decline |
Lactose -6.9% |
|
Average price accuracy |
1.1% |
Price increases in the milk powders were a key feature of TE413. SMP increased 4.3%, the largest product group increase, while WMP rose 1.2%. This contrasted with declines across other product groups, led by Lactose (-6.9%), Mozzarella (-3.9%) and Cheddar (-3.7%).
The regional results add more detail to the powder movements. Europe-origin SMP increased 6.8%, compared with 3.9% in Oceania. WMP moved in opposite directions across the two regions, with the 1.2% gain in Oceania smaller than indicated by the futures market.
The broad direction of powders was consistent with futures market expectations ahead of the Trading Event, although the increases were smaller than expected.
Milkfat prices differed more from expectations. Oceania-origin AMF declined 1.0%, while Butter was broadly unchanged at +0.1%, despite futures markets indicating larger declines for both.
Average regional prices showed quite different relationships across the three major product groups. Oceania-origin SMP prices were around 2.6% below Europe-origin SMP, while Oceania-origin Butter prices were approximately 9.9% higher. WMP remained more widely separated, with average Oceania-origin prices around 19.9% below those from Europe.
Looking at how these prices compare with their historical relationships provides a different perspective. For SMP, Oceania prices were around 3.8% lower than where they would typically sit in relation to Europe-origin SMP. That deviation widened from 1.8% in TE412.
Butter moved in the opposite direction. Although average Oceania prices were 9.9% higher than those in Europe, they remained around 14.9% below where their historical relationship with Europe would typically place them, with the deviation narrowing from 19.4% in TE412.
WMP also moved closer to its historical relationship, with Oceania prices 4.3% below where they would typically sit relative to Europe, compared with a 6.9% divergence in the previous Trading Event.
Price accuracy remained relatively consistent across supplier regions, at 1.0% for Europe, 1.1% for Oceania and 1.3% for America. The smaller this gap, the more precisely the auction identifies the final price. At product group level, most of the measures were also relatively close to the final clearing price, although Europe-origin Lactose and WMP showed somewhat wider gaps of 2.3% and 1.9% respectively.
Rollbacks were again a feature of the event. Of the 84 Traded Products that saw their announced price increase during the auction, 46 were subject to a rollback at the end of the Trading Event, accounting for around 16% of the total quantity sold. This means their winning price corresponds to the second-highest announced price.
TE413 also provides a clear example of how demand can shift as prices move during the auction. WMP saw no positive price increments between rounds 12 and 14, while Butter saw none between rounds 13 and 15. But demand subsequently shifted back towards both Product Groups from other offerings, resulting in their announced prices increasing again in later rounds.
This pattern shows why the level of demand at any one point in the auction does not necessarily determine the final price movement. As relative prices changed, aggregate demand shifted between available offerings, allowing price discovery to continue until final prices were established.
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.