GDT Auction’s “Forward Curve” is Significant

Alan Levitt, USDEC

Alan Levitt, USDEC

January 24, 2014 — The U.S. Dairy Export Council’s Alan Levitt says the most significant part of this week’s Global Dairy Trade (GDT) auction was what he referred to as the “Forward curve.” Speaking in today’s DairyLine Radio broadcast, Levitt explained that is the “winning bid prices out into the future,” and “they’re all basically flat or rising.”

The forward curve on U.S. delivered skim milk powder, for example is close to $4500 per ton or over $2/lb. thru July, he said, and “that’s significant because it tells us that the market seems to think that things are going to hold for quite awhile.”

He believes pent up demand is responsible. “Buyers were looking at the high prices toward the end of 2013, hoping things would pull back in early 2014,” Levitt said, “And they just haven’t and now they have to come back to the market and continue to buy and continue to pay these historically high prices for all the commodities.” Levitt says that bodes well for price into mid-year.

“China is the most important factor driving the global dairy markets right now,” says Levitt, and December import numbers were up significantly again. Second half imports of milk powder, whey, cheese, and butterfat were up 52% from a year ago, he said, “So they’re absorbing any increase in world milk production or supply.” That is significant on two fronts, he concluded, namely the quantity China is importing and the fact that they’re willing to pay historically really good prices.

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