Yesterday’s GDT results were a reflection of the development we have seen happening in the EU since a week or two – declining prices. Not unexpected by anyone and certainly not by Fonterra who, contrary to EU Cooperatives, kept their forecast pay out prices the same during the last quarterly price consideration end of February.
Overall the GDT index went down by 8,8% with significantly high losses on WMP ( 9.6%) and Butter (9.4%). This is spite of strongly reduced volumes compared to the same event a year ago: Minus 20,000mt. This brings the total reduction during the last 10 events to a total of 120,000 mt.
For the season to date, total reduction in volumes is 11% compared to the 13-14 season. Given that slightly less than 50% of Fonterra’s total NZ production is offered for sale on the GDT platform this implies that the total milk output reduction of 3,2 as forecasted by Fonterra has already been more than out balanced by reduced offering on GDT in the past 5 months.
Ingredients produced 2,100,000 tonnes. Sold on GDT > 1,000,000 tonnes. 3.2% reduction in milk would imply Ingredients output to go down by 67,200 tonnes for the full season where the actual reduction in offerings has been 95.000 tonnes at only 85% into the season. ( in fact this is a simplified calculation as ingredients only account for about 75% of all milk – so instead of 67,500 tonnes this should be 75% = 50,625 tonnes.) In theory there should be no supply constraints occur on basis of the -3.2% milk forecast.
Since we mentioned the Dead Cat Bounce some time ago we had many questions asking what exactly it means. We had to wait a bit but after yesterday’s GDT it became possible to illustrate this with actual data.
After we reported last week about the dramatic fall in USA exports, January figures for EU have been published showing a similar movement except for SMP.
The Dutch quotations are a reflection of the week past, whereas the TMV values are calculated on today’s prices. From this week onwards we have made some changes in the TMV mix. Instead of SWP we now calculate with wpc35 for the whey component and we have added a TMV for WMP.
In general it can be said the market remains lackluster and with the exception WMP, all prices are clearly below this week’s quotations. Especially SMP suffers with prices about 10% below the quotations above for this week. It is remarkable that WMP seems to move along very stable without impact from the market for other products. WMP is considerably more expensive than its components which would work out at a theoretical price of € 2,525/t.
