The dairy market is composed of two markets.
- Producers and project development: Utilize the assessment to evaluate their production cost efficiency
- Risk Management: A benchmark to promote risk management by pricing a purchase or sale as a premium or discount to across a wide distribution of geographical markets and transaction seasonality
- Blend the global assessment of butterfat and solids nonfat based on ingredient specifications to establish a cost or price benchmark specific to a participant’s purpose and be able to utilize market instruments to manage price risk
In dairy markets, the divide between origin and destination is accentuated by the differences in the seasonality of milk production in the northern and southern hemispheres; food/health/security regulations; the demographics affecting purchasing power in destination economies and the varying development of consumer tastes for dairy products and ingredients.
Reconfiguration of trade flows and trade alignments, coordination amongst global central banks, lower interest rates (resulting cointegration between currency exchange rates) and information availability (and connectivity) have driven price discovery closer.
On average, 13M MT of dairy commodities have been exported each year over the past 5 years from origin markets to destination economies. It is estimated that the world population will grow by approximately 400M people in the next 5 years, of which some 350M will likely occur in South East Asia and Africa.
These economies will need to develop a secure nutrition supply in an economically viable manner to nurture their populations and thrive in the future. We anticipate this development to be a combination of developing economically competitive domestic milk pools, processing assets that can flexibly valorize production, alongside dairy ingredient and product imports. We feel this global price assessment will improve transparency into the value of milk solids in a way that can facilitate the development of assets and rebalance dairy solids trade for the next decade.
Method
Global Butterfat Price Assessment is derived from a weighted average of cash and forward prices, weighted by the share of butterfat tons available for exports from the three representative origin markets: US, EU and New Zealand.
These are averaged by share of exports for the respective assessment month across the past 3 years at the end of each month.
The Maple View
Butterfat of US Origin
Spot Month: Volume weighted average of NDPSR-reported price during the calendar month and daily CME Cash traded price.
Forward Month: Daily volume weighted average price of the respective futures contract traded during two calendar months prior to the assessed month.
Butter price to Butterfat Price conversion: USDA Butterfat pricing formula: (US Butter Price minus $378/MT)/0.82576
Butterfat of New Zealand Origin
Spot Month: Volume weighted average price of the respective GDT Butter Contract Auction price and GDT AMF Auction Contract price based on the last 4 events (Spot month and what the contract auctioned for during the events in the month preceding the assessed month).
Forward Month: Volume weighted average price of the respective GDT Butter Contract Auction price and GDT AMF Auction Contract price across all events prior to the assessed month.
Butter price to Butterfat Price conversion: Volume Weighted Average of (Volume Weighted Average of the GDT Butter Auction price minus $540/MT)/0.83 and (Volume Weighted Average of the GDT Butter Auction price minus $650/MT).
Butterfat of European Origin
Spot Month: Butter Price indices published by EEX exchange, converted to US Dollar price using EURUSD Futures price traded on the CME.
This price as a source is not adequate to be replaced by a more transparent index or price assessment. EEX Futures are not sufficiently traded and an alternative will need to be identified in the near term until liquidity increases.
Global Nonfat Solids Price Assessment
Derived from a weighted average of cash and forward prices, weighted by the share of butterfat tons available for exports from the three representative origin markets (US, EU and New Zealand) and averaged by share of exports for the respective assessment month across the past 3 years, at the end of each month.
SNF of US Origin
Spot Month: Volume weighted average of NDPSR-reported price during the calendar month and daily CME Cash traded price.
Forward Month: Volume weighted average price of the respective Nonfat Dried Milk Powder (NFDM) futures contract traded during two calendar months prior to the assessed month.
Nonfat Dried Milk Powder price to Nonfat Solids Price conversion USDA SNF pricing formula: (US Butter Price minus $370/MT)/1.01
SNF of New Zealand Origin
Spot Month Volume weighted average price of the respective GDT Skimmed Milk Powder (SMP) Contract Auction price based on the last 4 events (Spot month and what the contract auctioned for during the events in one month preceding the assessed month).
Forward Month: Volume weighted average price of the respective GDT Skimmed Milk Powder (SMP) price across all events prior to the assessed month.
Skimmed Milk Powder (SMP) price to Nonfat Solids Price conversion: Volume Weighted Average of (Volume Weighted Average of the GDT SMP Auction price minus $420/MT).
SNF of European Origin
Spot Month SMP Price indices published by EEX exchange, converted to US Dollar price using EURUSD Futures price traded on the CME.
This price as a source is not adequate to be replaced by a more transparent index or price assessment. EEX Futures are not sufficiently traded and an alternative will need to be identified in the near term until liquidity increases.