News Milk
Oversupply causes a solid negative on GDT
The first GDT auction of July has yielded a substantial minus for the most offered dairy products and for the auction index as a whole. It fell by 51 points. The average price fell by 4,1%. The main cause seems to be the almost 70% larger supply (+10.000 tonnes) of product.
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The main product, whole milk powder, suffered the biggest price drop (in dollars) of 5,1%, but the prices of skimmed milk powder, butter, butter oil and cheese were also hit.
However, there were not only declines. The prices of lactose and buttermilk powder actually rose slightly.
The additional supply that comes with the new season now underway in New Zealand is not only quite massive, it also coincides with a generous supply still available from the northern hemisphere.
The large supply also explains the decreases in the various product quotations better than in previous auction rounds. At that time, prices of various raw materials shot up sharply, sometimes down, apparently without any clear reason.
The current decline marks the fourth consecutive negative GDT auction since a peak on May 6 this year.
It is striking that little alternative supply has appeared at this year's GDT auctions so far, even though the GDT has now concluded various agreements with, among others, American companies to auction their product as well. The existing supply is mainly Fonterra product, supplemented by a limited volume of Arla and Solarec. However, it is quite possible that this is done via another, less public circuit.