Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
It would not be adding quantity to the global supply pool, he says.
“The products offered on the European platform are already produced and sold today into local and global markets,” Hansen told Dairy News.
“The introduction of a new online trading platform for European supply merely provides a more efficient channel to sell these products. Therefore, we expect a new European platform will attract more buyers to online trading, increasing the total number and diversity of potential buyers for all sellers.”
GDT is in the phase of validating the commercial viability of providing a new European dairy trading platform, Hansen said at the release of annual results last week.
It is working with the European Energy Exchange (EEX) on the possibility of developing the new platform for auctioning European sourced supply to domestic and international buyers.
Details of the service are being put in front of prospective sellers, commitments to participate in the platform are being sought and the nature of the arrangements between EEX and GDT finalised, says Hansen.
A final decision on whether to proceed is expected mid-year. If the decision were positive the first auction would be likely in the first half of 2020.
“While dairy is a globally traded product the reality is each major market has its own needs and to remain relevant we have to directly look at ways of innovating our auction design and our offering model.
“We believe partnering with an entity such as the EEX will add credibility and relevance to the European market, will attract more suppliers and will ensure the platform remains focused on European needs.”
GDT Events had a good year in the financial year to December 31, 2018 with annual trading volume up 7.5% and a 5% increase in the average number of participating bidders per quarter, Hansen says.
“The clearance rate remained high at 94%. Whole milk powder (WMP) remained the largest product at about half of total volume. Skim milk powder (SMP) continues to attract the most bidders with nearly 200 buyers participating during the year.”
The trading tensions between the US and China highlights the diversity of GDT’s bidding pool, he says.
“For example during 2018 more than 70% of WMP and SMP buyers were based outside of North Asia yet at the same time we also offer access to a large number of buyers [in] China.”
This year they are working on several key activities including a refresh GDT Events auction platform. “It will provide a much more user friendly flexible experience for participants. For example bidders will be able to be logged on multiple devices.”
Buyers' facility
Global Dairy Trade is looking at whether buyers will be able to list on its GDT Marketplace platform as well as sellers.
GDT Marketplace was introduced in 2016 as another online trading platform where sellers could list dairy products for sale at any time.
GDT is now looking at whether it might be useful for buyers to have the same option, says Hansen.
“The way we developed GDT Marketplace initially was that people who wished to sell product would come on and put up a seller listing of what they have available to sell and the conditions around that,” he says.
“At various times a buyer might want to do something equivalent – put up what it is they would like to buy, what the conditions are and what the parameters are around that. That is a high level concept at this stage and we are working with a number of interested buyers on what sort of arrangements would make sense to them and provide value.
