GDT price index jumps on strong WMP demand

Thursday, 9 July 2020

By Patty Clayton

The latest GDT event saw the overall price index rise for the fourth consecutive time; rising by 8.3% overall from the previous auction. This is the largest increase since November 2016, driven by a 14% jump in the WMP price index (across all delivery periods).

While prices for WMP increased across all delivery periods, the strongest lift (24.5%) was seen on near-term contracts (Aug-20 delivery).

The pull on WMP prices has been linked to the increased volumes placed on the auction combined with strong short term demand. Demand in China is said to be increasing as foodservice recovers, generating the need for additional short term cover. At this time of year, production levels in New Zealand (NZ) are seasonally low, and stocks run down. It may be that the increased availability at the latest event spurred on buyers, and pushed up bids.

The latest results will increase the price premium for NZ over EU product which has occurred since April. How long the price rally will continue will depend on the size of this premium relative to transport costs from Europe, and the extent that demand is driven by the need for short term cover, where delivery time is more important than price.

Patty Clayton

Lead Analyst - Dairy

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