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Rabobank commentary on GDT Event results

Rabobank’s dairy analyst Emma Higgins on today’s GDT Event result:

The spread in pricing between fats and proteins are at record levels. AMF lifted 2.5% to USD 5,936/tonne (the highest average price for AMF in GDT history) and although butter lost ground by 1.6%, the average price at USD 4,751 is still the second highest average price in the history of butter offerings on GDT. Given low SMP pricing dynamics, coupled with lower global milk production, low fat stocks are underpinning outstanding fat prices.

Looking at the powder front, WMP prices lifted a modest 2.4% to USD 2,924 /tonne. Some price support has come from lower auction volumes this time around, with 20% less on offer overnight compared to the last auction. While SMP moved a fraction lower (-0.8%) to USD 1,913/tonne, a sizable 50% increase in SMP offer volumes makes the result overnight seem very positive indeed. Despite this Rabobank expect to see SMP prices continue to stick around these low levels. Providing a floor for SMP pricing support over the coming weeks and months will be the re-opening of the European intervention scheme. As at end of March 2017, no sales had yet taken place - but watch this space.

We are anticipating the divergence between proteins and fat prices to continue across much of 2017. Global milk production continues to decline, impacting on the volume of milk available for export. We think the exportable surplus will take until 2H 2017 to increase and this will help underpin relatively stable prices across this period.

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