Tomorrow’s Global Dairy Trade (GDT) auction (October 6) is expected to strengthen again, according to ICOS dairy policy executive T J Flanagan.

“Expectation is increasing to this effect,” he said.

“We are already seeing price projections strengthening on the New Zealand’s dairy futures markets right through to the new year. So, on that basis alone, prices should lift at the next GDT.”

The NZX Dairy Futures Market is predicting that international markets for whole milk powder, skimmed milk powder and anhydrous milk fat will increase by 5% between now and the end of 2015. Meanwhile, the GDT price index has increased by 48% since the beginning of August.


New Protocols

Flanagan said that the jury is out regarding Fonterra’s intention to introduce new protocols, regarding the operation of the fortnightly GDT auction.

“It’s all a bit vague. Fonterra is saying that the new measures will increase the transparency levels associated with the auction.

“And if this achieved, all well and good. There has been a suspicion for some time the GDT was controlling the market, not reflecting it.”

Fonterra confirmed that new protocols will be introduced as part of its aim to further improve the transparency of its online auction. Recent GDT price increases appear to have added fuel to discussions within the industry about whether alterations to volumes offered on the auction have helped lift its prices.

GDT’s new protocol enables sellers to publish normal guideline ranges for their supply volume forecasts and, if forecasts go outside these ranges, then sellers must publish an explanation. Fonterra has agreed to follow this procedure and the change is effective from October 6.

Fonterra also intends to increase the auction’s liquidity by combining product groups to create larger pools of demand and supply. Initially, it intends to offer a milkfat group that combines butter and Anhydrous Milk Fat. This measure will take effect in early 2016.