Indications from the NZX derivatives market, the New Zealand-based exchange where dairy futures contracts are traded, point towards another fall for the GDT index at next week’s auction.

March and April future contracts for whole milk powder (WMP), have declined by as much as 6% in the last week. WMP futures tend to be a decent gauge for the performance of upcoming GDT auctions as WMP is the key commodity traded at the auction format, accounting for more than half of the product sold.

If next week’s GDT auction does record a decline, it will be the third straight fall in the index since the beginning of 2016. Last week, the EU Milk Market Observatory continued to hold its bearish outlook for the coming year.

The European research body said until there is an improvement in the global supply and demand, balance cannot be reached. The MMO said that starting stock levels of dairy commodities in 2016 are higher than previous years after global demand for dairy in 2015 failed to match production. Before any improvement in the market outlook can take place, these excess stocks will need to be cleared.

Dairy futures market: decline in WMP futures points to another drop in GDT

Futures contracts for whole milk powder have been in retreat for the past week, suggesting that the average price at next week’s GDT auction may decline once again.