Sentiment around milk powder prices has weakened somewhat ahead of this week’s GDT auction in New Zealand. Futures prices for whole milk powder (WMP), the key commodity traded on the GDT, have declined in the last week. March, April and May contracts for WMP dropped 5% in price over recent days, which could signal a negative result at Tuesday’s GDT auction.

While never set in stone, the futures market for WMP can act as a decent bell weather for buyer sentiment in the dairy market. The futures market can be the best way of gauging how an upcoming GDT auction will play out, particularly as WMP accounts for over 50% of product traded on the benchmark dairy index.

The reason for this week’s weakening price sentiment from dairy buyers and the decline in the futures market is primarily due to the increased volume of WMP being offered for sale at this week’s GDT. Fonterra announced last week it would offer 13,950t of WMP for sale at Tuesday’s GDT auction, which is a 5% increase compared to the last auction. This increase in the volume of WMP for sale would appear to have dampened the price expectations on the buy side of the market.

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Dairy markets: milk powder futures weaken ahead of this week’s GDT

Fonterra will offer 5% more WMP at this week’s GDT, which has resulted in a drop in the futures market for milk powder