Dairy Skim – 18 April 2023 Global Dairy Trade Auction

Dairy Skim is a bite-size episode series where HighGround’s top analysts break down the latest dairy data release. Today, Stu Davison discussed today’s Global Dairy Trade Auction Results. You can view the snapshot report here. Subscribe so that you never miss an episode!

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[00:05] Stu: Hello and welcome to HighGround’s GDT Skim update, your bite-sized podcast of dairy market updates—this week, with Stu Davison.

[00:14] The headline figure for this week’s auction is the 3.2% GDT price index gain, with a sea of green arrows across all commodities sold. This positive auction follows four declines, but interestingly enough, is the same sized bounce we saw five auctions ago. This is the driving factor behind my thoughts that this auction is just a bounce as we keep moving lower.

[00:35] Diving into the key results, the biggest price gain was achieved by Skim Milk Powder, lifting 7.0%, with price gains across each contract period. Of note for the Skim Milk Powder market, I don’t personally don’t think this result is direction setting, due to three factors, namely: One, Middle Eastern buyers purchased their fourth largest volume of Skim Milk Powder in the GDT platform’s history, also the largest purchase volume since November 2010, potentially indicating a real short-term demand there. Secondly, the premium that New Zealand Medium-Heat Skim Milk Powder achieved over its European equivalent is at odds with this result being direction setting, with the margin pushing out to a whopping $460/MT; one of the largest margins we’ve seen for some time. Also, most likely a result of the Middle Eastern buyers noted above.

[01:22] Algeria’s most recent tender has reportedly been filled with mostly EU Skim at much cheaper prices than this average GDT Skim Milk Powder price, closer to the EU price achieved at this event, so a massive discount to the Oceania Skim price. So, again, with those three factors, I don’t think that this result is direction-setting.

[01:41] Moving on to Whole Milk Powder prices, which managed a 1.0% increase on average. Somewhat neutral on prior expectations, bouncing around that $3,000/MT mark. Notably, North Asian buyers were a little bit less dominant than normal on the buy side, with Southeast Asian buyers returning somewhat in the Whole Milk Powder category, with added support coming from Middle Eastern buyers again. Whole Milk Powder prices are mostly flat across the forward sales curve, likewise with the nearest three SGX Whole Milk Powder futures, trading into a $50MT range across the nearest three contracts.

[02:14] Moving on to the milk fat products. Butter pushed 4.9% higher, while AMF gained 4.7%. This relatively equal movement keeps the premium for butter relatively similar to where it was at the last auction but just slightly shifts that milk fat values higher. Notably, Southeast Asian/Oceania buyers secured a massive volume of butter at this auction—something with keeping an eye on.

[02:37] Cheddar prices posted a 5.7% gain, with this result recovering GDT cheddar volumes almost back to the point halfway through March. The question for the coming auction is if GDT cheddar can break back through the $4,500/MT mark.

[02:51] So, in summary, it was a positive event overall. However I, again, don’t think this is the magic market turn that the sell side is hanging out for. From the strong buying levels recorded from Middle Eastern buyers, it would be assumed this is just another bounce as we keep easing lower. Fundamentally, nothing has shifted and market pressures remain in place for more downward expectations.

After that slightly negative outlook at the end, thanks for listening, tune in to our weekly podcast later this week for a full market run down. Cheers.

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