For two consecutive trading sessions, New Zealand's Global Dairy Trade (GDT) has shown an uptick. While the December 16 and January 6 market events for the nine traded dairy products don't exactly represent a market trend yet, they are far better than the continuous decline that took place from February to December 2014. During that time, payout to dairy producers fell 44 percent and approached a 2-1/2 year low in New Zealand.
The Global Dairy Trade's auction is a great bellwether for the Southern Hemisphere, but it doesn't perfectly correlate to prices in the U.S. However, the GDT is a strong indicator of prices yet to come, as New Zealand is the world's leading dairy product exporter, and these days, the U.S. has been exporting roughly 16 percent of its product.
All dairy producers would welcome a settling out of the market from this December's downturn and futures forecast. Over the course of the past year, dairy product prices at the retail level fell 7.7 percent, reported the United Nations Food and Agriculture Organization. And one quarter of that figure happened in just the past month. Of course, that is only a fraction of what happened on the grocery store level. In December, the All-Milk price was $20.80. That was off $3.60 from November 2014 and represented the largest drop since January 2009.
So far, Class III futures have moderated as well as Class III contracts for January to November 2015 are only down 40 cents, on average, in trading since Christmas. Those 11 contracts averaged $15.50 late last week.
(c) Hoard's Dairyman Intel 2015
January 12, 2015
