Behind the Market | GDT Trading Event 414

The GDT Price Index increased 2.5% at GDT Trading Event 414 (TE414), extending the recovery seen in the previous Trading Event, when prices rose 1.2%. This marked the second consecutive increase following the decline in TE412.

Price movements varied across Product Groups. Whole Milk Powder (WMP), Skim Milk Powder (SMP) and Butter Milk Powder (BMP) moved higher, while Cheddar and Anhydrous Milk Fat (AMF) declined. Butter, Lactose and Mozzarella prices saw smaller movements. The result continued the recent pattern of rising milk powder prices alongside more varied movements across other Product Groups.

A total of 42,088 MT of dairy products was sold to 105 winning bidders across 17 bidding rounds. This was slightly above the 41,692 MT sold in TE413, although participation declined from 165 to 145 bidders.

Milk powders were a key feature of TE414, with BMP recording the largest Product Group increase at 8.4%. WMP rose 4.4% and SMP increased 3.4%, extending the gains recorded by both powders in the previous Trading Event.

Demand for Europe-origin SMP was particularly strong, following a strong increase in the price during the preceding week’s Pulse Auction. This was a notable feature of the auction's regional powder results.

In contrast, Cheddar recorded the largest decline at 7.4%, following a 3.7% decline in TE413. AMF fell 3.4% and Butter edged down 0.4%, continuing the divergence between milk powder and milkfat price movements. Mozzarella and Lactose recorded smaller increases of 1.3% and 0.6%, respectively.

Average prices for Oceania-origin and Europe-origin SMP diverged further in TE414, with Oceania prices 5.3% below those from Europe, compared with 2.6% in the previous Trading Event. Butter prices remained more closely aligned in their relative position, with average Oceania-origin prices 10.0% higher than Europe-origin Butter, compared with 9.9% previously.

For WMP, the regional price difference narrowed, with average Oceania-origin prices 14.5% below those from Europe, compared with 19.9% in TE413.

Looking at these prices against their historical relationships provides another perspective. Oceania-origin SMP prices were around 5.8% lower than where they would typically sit relative to Europe-origin SMP, widening from 3.7% in the previous Trading Event.

For Butter, Oceania prices remained around 10.1% below where their historical relationship with Europe would typically place them, unchanged from TE413. WMP showed a different pattern, with Oceania prices moving to approximately 1.0% above where they would typically sit relative to Europe, compared with 4.0% below in the previous Trading Event.

Out of 96 Traded Products being offered in TE414, 80 saw an increase in the announced price at least once. Out of the active products, 35 were subject to a rollback at the end of TE414. This resulted in a total share of the rollback quantity of 10.6% across the Trading Event. For those active products, price accuracy averaged 1.1% for TE414, unchanged from the previous Trading Event. Across supplier regions, accuracy ranged from 0.9% in Europe to 1.0% in America and 1.2% in Oceania. The smaller this gap, the more precisely the auction identifies the final price.

BMP stood out with price accuracy of 4.6%, considerably wider than any other active Product Group. Demand shifted between its contract periods multiple times as announced prices increased, keeping BMP active into the later stages of the auction. Cheddar also remained active for many bidding rounds despite the large fall in prices, although its price accuracy was considerably closer to the overall average at 0.9%.

Demand patterns also differed across the major Product Groups. AMF began with relatively low demand, but that demand remained persistent, taking eight bidding rounds before its aggregate demand indicator declined. WMP showed more moderate initial demand, which was similarly persistent, taking nine rounds before its aggregate demand indicator fell, ultimately leading its prices to increase compared to the prior Trading Event.

These examples illustrate how the initial level of demand does not necessarily determine the final price movement. How demand changes as prices adjust throughout the auction also matters.

The Trading Event concluded after 17 bidding rounds through the contingent supply mechanism. By round 16, only free eligibility was keeping the auction open, illustrating how the final stages of price discovery can depend on the interaction between remaining demand and available supply.