ROLAND SOSSNA, Editor International Dairy Magazine: Global Dairy Trade will stay THE benchmark

Roland-Sossna_180_newGlobal Dairy Trade has not been setting, but – let’s say benchmarking the worldwide prices for dairy commodities for almost a decade. From a relative small start with only Fonterra behind it selling WMP only, Global Dairy Trade has developed into a platform that trades eight commodity items from handful of manufacturers that belong quite naturally to the biggest exporters of milk products in the world.

In 2016, Global Dairy Trade has sold an astonishing 636,000 tons of product, generating sales of more than 1.7 billion US dollars. During the past few auctions, the amount of products traded was always higher than 20,000 tons. But although there is butter, cheese (Cheddar) and a few other products in the portfolio, in terms of volume, the by far biggest items in all these auction events are WMP and SMP. And most probably will always be. This means that the average price calculated across all the commodity sales, which is so prominently displayed whenever one of the fortnightly auctions is closed, does no way reflect what one might call market reality. This thesis also applies if one takes a look at worldwide dairy trade that is about 14 times bigger than what Global Dairy Trade is moving. Most of the products are directly traded between manufacturers and their customers. The reason for this is quite simple. Global Dairy Trade can only sell standardized produce while customer-specific made products cannot be traded at a more or less anonymous auction.

Nevertheless, there is still much in store for Global Dairy Trade. To overcome the problem posed by minimum quantity requirement s, Global Dairy Trade now aims at pooling the offering of smaller players in kind of a multi-seller bundle. This should attract more sellers to join the auction platform. The auction itself promises that this will “enable greater confidentiality of commercially sensitive information.” This, of course, has yet to be seen. It seems hardly conceivable that the addition of a number of small offerings to the overall offering will provide more transparency. But transparency is not good for a market that is exposed to speculation, anyway. In my opinion, Global Dairy Trade is a good thing and it should be established if the industry had not yet done so. But is always will stay a benchmark for pricing and should never determine the price levels in domestic markets.

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