Sentiment in dairy markets has been bearish since the beginning of the year and it is hard to find any glimpses of hope right now, particularly amid continued concerns for the health of the global economy.
At the last GDT auction two weeks ago the average product price plunged by more than 7% to leave the benchmark dairy index at its lowest point since September 2015 when the market was practically on the floor.
The next GDT auction takes place on Tuesday this week and little has happened to suggest there will be a lift in prices this time around. In the wake of the last GDT auction, futures prices for whole milk powder (WMP), a proxy for the performance of the biweekly GDT, slumped by almost 13% and have continued to trade at this level over the past fortnight.
Another fall
March, April and May contracts for WMP offered by the NZX derivatives market, the New Zealand-based exchange where dairy futures contracts are traded, have been trading below $1,800/t for the past 10 days. With WMP futures trading at this price level, it suggests the GDT may be in for another fall this 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 the product sold.
Should this week’s GDT auction record a decline, it will be the fourth consecutive drop in the dairy index since the beginning of 2016. The market continues to struggle for balance between an increasing global supply and reduced demand.
At the start of the 2015/16 season, it had been hoped that New Zealand dairy farmers were going to cut production in the region of 6% to 7%, but this level of fall-off does not appear to have transpired. The latest figures show that Fonterra’s milk collection for the month of January was down 1.8% year-on-year and puts milk collections for the first eight months of the year back just 3.7% on last season.
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GDT plunges by more than 7% after latest auction
Dairy futures market: futures continue to paint a bleak outlook
Sentiment in dairy markets has been bearish since the beginning of the year and it is hard to find any glimpses of hope right now, particularly amid continued concerns for the health of the global economy.
At the last GDT auction two weeks ago the average product price plunged by more than 7% to leave the benchmark dairy index at its lowest point since September 2015 when the market was practically on the floor.
The next GDT auction takes place on Tuesday this week and little has happened to suggest there will be a lift in prices this time around. In the wake of the last GDT auction, futures prices for whole milk powder (WMP), a proxy for the performance of the biweekly GDT, slumped by almost 13% and have continued to trade at this level over the past fortnight.
Another fall
March, April and May contracts for WMP offered by the NZX derivatives market, the New Zealand-based exchange where dairy futures contracts are traded, have been trading below $1,800/t for the past 10 days. With WMP futures trading at this price level, it suggests the GDT may be in for another fall this 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 the product sold.
Should this week’s GDT auction record a decline, it will be the fourth consecutive drop in the dairy index since the beginning of 2016. The market continues to struggle for balance between an increasing global supply and reduced demand.
At the start of the 2015/16 season, it had been hoped that New Zealand dairy farmers were going to cut production in the region of 6% to 7%, but this level of fall-off does not appear to have transpired. The latest figures show that Fonterra’s milk collection for the month of January was down 1.8% year-on-year and puts milk collections for the first eight months of the year back just 3.7% on last season.
Read more
GDT plunges by more than 7% after latest auction
Dairy futures market: futures continue to paint a bleak outlook
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