Why GDT is cause for optimism in dairy

The auction, organized by Fonterra, rose 2,2% overall to $31.43 per tonne. This was the second increase in a row and also the highest level since mid-July. Butter prices were one of the drivers, rising by as much as 8,4% to $3,5461 per tonne. Whole milk powder also attracted attention, rising 1,7% to $3.041. The traded volume recorded a slight increase and amounted to approximately 35.000 tons. 

Trend break in butter
The increase in the price of butter can be seen as a break in the trend. Since the beginning of July, the manufacturer has been trading at lower levels during the auctions. Butter prices have also been under pressure in Europe in recent weeks. The reason for the increase is the volume that Fonterra offered. This was considerably less than usual. This is because the dairy cooperative also manages to sell large volumes through regular channels. Whether there will be a reaction on the European butter market will remain to be seen in the coming days. This is not an ABC in view of the volumes in the Private Storage Scheme (intervention). 

Whole milk powder crosses the psychological border
Whole milk powder, Fonterra's most important dairy product, exceeded the psychological barrier of $3.000 per tonne for the first time since early August. The fact that this happens in the month in which milk production in New Zealand is approaching its seasonal peak (whereby the supply at the start of the season was considerably higher than last year) underlines the good demand for this product. This also applies to a lesser extent to skimmed milk powder, which lost 0,9% to $2.865 per tonne.

Weak dollar
There is a caveat to the revival of the GDT, because the products are traded in US dollars. In the run-up to the US elections, the US dollar has lost ground; against the euro, but also against the currency units in Oceania such as the New Zealand dollar.