HighGround Dairy GDT Analysis – Trading Event 103

Increased milk supplies in New Zealand coming to the auction by way of whole milk powder provided additional resistance to overall dairy commodity prices at this week’s Global Dairy Trade event. GDT’s Price Index declined for the second straight auction, the first time since TE 92 & 93 (May/June) this has occurred. Cracks on the forward curve for WMP and US-sourced SMP seem to suggest additional price weakness is forthcoming but our contacts still suggest product availability in these markets are tight due to strong global demand. In the meantime, butterfat products showed mixed results as prices diverge. Overall, we view Tuesday’s auction as slightly bearish for WMP & US-SMP, bearish for butter while bullish for anhydrous milkfat and NZ-SMP. A total of 49,304 MT of dairy products were sold at this week’s auction, up 14% from three weeks ago and 9% below the corresponding auction last year. In Fonterra’s pre-auction GDT 12 month volume forecast last week, a total of 789,640 MT of dairy products were estimated to be sold, up 2.1% from their last revision and representing a 10.5% gain (75,000MT) from the recent lows just two months ago. All of that growth is coming from increases in WMP, up 86,000MT while nearly 14,000MT was pulled from the SMP category. These changes in product mix are starting to show up in Fonterra’s GDT results to be discussed later in this report. GDT welcomed Euroserum, the Dairy Ingredients business unit of French dairy cooperative SODIAAL, to its family of sellers on this week. Euroserum offered low and medium heat Extra Grade SMP in C2 in its inaugural auction.  Whole Milk Powder: Additional WMP Volume Creating