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GDT Price Index: takes a step down at the latest event
Thursday, 9 November 2023
The GDT Price Index took a step down at the latest Global Dairy Trade Event. After four consecutive sessions of growth since September the index has softened by 0.7%. The average price reported at the latest event (7 November 2023) was $3,255. This had been recovering for the previous four consecutive periods, reversing the previous trend of decline seen since March 2022.
At the auction, WMP recorded a decline of 2.7% at $2,971/t, butter declined by 1.6% to $4,890/t while other product categories continued the positive momentum. SMP increased by 2.3% to $2,724/t and cheddar prices increased by 4.5% to $4,042/t. Volumes traded were 4.1% lower at 34,514 t compared to the previous event. Most of the product sold was WMP, which weighed negatively on the index.
Though there has been a marginal decline at the latest event, the current factors denote recovery could be imminent in the coming weeks. Global milk supplies recorded a decline of 0.3% year on year in August. Normally there is an inverse relation between production and prices on the GDT with prices gaining momentum amid lower supplies and vice versa. Despite the recovery in the months of September and October, prices are holding well below the peak of March 2022 levels and are hovering around pre-covid levels barring butter, which is still holding above.
Powders constitute more than 50% of the sales volume on the GDT. China remains one of the major buyers in the powder markets. Along with China, other North Asian and Southeast Asian buying activities were also reported recently. According to the latest Rabobank report, an import deficit of 11.9 M t of liquid milk equivalent (LME) is expected in China in 2023. The deficit is expected to increase over the next ten years as demand in China is expected to increase at a greater rate than domestic supply.
The global picture for the markets seems to be improving. Expected increase in purchases from China and demand ahead of the Christmas holidays presents a brighter picture. Considering lower supplies on the global front and increasing demand, and barring any further shocks, prices are likely return to the more positive momentum witnessed in the previous two months. This would ease margin pressure on producers to some extent, as farmgate milk prices are underpinned by wholesale commodity prices.
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