HighGround Dairy – GDT Auction Analysis – October 3, 2013

Global users of dairy commodities remain very aggressive in their pursuit to lock up physical supply in the near term. Two straight increases in Fonterra’s forecast  GDT volume and an improved milk production outlook in  most  dairy producing regions could not keep buyers away from the market. Yesterday’s bullish auction reminds the dairy industry once again that global demand remains firm.  45,253 MT of dairy  products were transacted from a total of five different sellers during Trading Event 101, a 3.1% decrease from two weeks ago and  nearly 24% lower from the corresponding auction last year.  The industry had seen Fonterra’s forecast volumes drop throughout the summer as product was pulled from the auction rolls and  likely  committed to specific customer contracts or other non-commodity items.  It was our opinion that an increase in contract customers would lead to a decrease of GDT participantsand provide some weakness at yesterday’s auction.  But the results proved otherwise – incremental demand continues to keep the global market well-supported. Though GDT’s Price Index reached its third highest level on record (April ‘13  auctions were higher) yesterday, $4,980/MT is the highest average winning price in GDT’s history.