The negative result from the first GDT auction of 2017 saw a sharp correction in dairy futures markets. At the last GDT event, the average price of whole milk powder (WMP) fell almost 8% to an average of $3,295/t as Chinese buyer demand softened somewhat.

Dairy futures markets reacted negatively to this decline with February, March and April contracts for WMP weakening by 7% in price in the days after the GDT auction. Futures prices have since recovered some of this decline but overall the market remains tentative ahead of this week’s GDT auction on Tuesday.

Fonterra will offer more than 13,000t of WMP for sale at this week’s GDT auction which should provide a decent barometer of the appetite in the market right now.

Also taking place this week is the EU Commission’s latest tender process for the 22,000t of skimmed milk powder (SMP) it is trying to sell out of intervention. At the last tender, the EU Commission confirmed it had rejected all offers made for the SMP stock as they were deemed to be too low.

In total, the EU has sold just 40t on SMP for prices ranging between €2,150/t and €2,200/t. The Commission will continue to hold bi-monthly tenders for the remaining volume of SMP until this is sold.

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