The governing body has proposed three rule changes and opened a period of public consultation, which ends on July 28.
Should the third rule change concerning multi-seller pools be implemented, the first new users would be a group of United States lactose processors.
They would be publicly identified, and be required to offer a minimum quantity of the standard lactose specifications each year.
But each company could pick and choose its GDT events, and actual tonnages offered and prices made by each company wouldn’t be disclosed.
Instead buyers would bid on US lactose pools and tonnages, knowing which companies were registered sellers and that their premises and products were independently certified.
Information on offer quantities and starting prices would be provided to bidders at an aggregated pool level.
The GDT Events oversight board said a number of US dairy companies wanted better price discovery mechanisms, but didn’t want to disclose their supply data.
The pooling method would provide some confidentiality, but resulting contracts would be conducted normally between winning bidders and willing sellers.
Successful buyers would be allocated to one of the pool sellers shortly after the close of the event.
The pool structure had also been designed to account for significant differences in freight costs, so buyers were aware of the costs and sellers received equal net return.
AgriHQ dairy analyst Susan Kilsby said the multi-seller pool proposal seemed to be driven primarily by the sellers’ needs, rather than buyers’ needs.
“It might increase the range of products offered on GDT, but buyers won’t know which company will supply the product until the auction is completed, which may not suit all buyers’ requirements.
“Having lactose trading on GDT on a regular basis would be beneficial for the market for both buyers, and for the market in general.
“Lactose prices currently are not very transparent as there is no open market or futures market.
“Murray Goulburn used to sell a little lactose on GDT but hasn't offered any product since late 2014. European dairy company Arla does sell lactose on GDT, but nothing from the US,” Kilsby said.
New Zealand was a large importer of lactose, to the tune of about 70,000 tonnes annually.
It was produced elsewhere in Europe and the US as a by-product of cheesemaking and NZ didn’t proportionally make large amounts of cheese, although Fonterra’s rebuilt plant in Stanhope, northern Victoria, would boost cheese production.
Therefore lactose was imported and used to standardise milk powders, including infant formulas.
The import tonnage of lactose increased by 24% in the five months January to May, compared with the previous corresponding period.
This was put down to increasing volumes of whole milk powder and infant formula being produced.
Fonterra had come under pressure from some of its farmer-suppliers to pay specifically for the variable lactose percentage in milksolids, in the same way that it paid for protein and fat.
The company’s response was that lactose was a relatively low-value product, and not material in calculating the milk price when compared with protein and fat.
In the most recent GDT auction, Arla Foods lactose sold for an average of US$825/t, the lowest price of the eight dairy commodities routinely sold on GDT.
