How does the Global Dairy Trade auction work and what does it mean for your pricing?

Global Dairy Trade (GDT) is an online auction platform where dairy producers sell commodities to registered buyers. The main auctions, called GDT Events, take place twice a month. The results, including the GDT price index, are widely followed as an indicator of international dairy prices, particularly for product from Oceania. For European ingredient traders, GDT is a reference point for market direction, not a price for their own contracts.

How does the auction work?

GDT was set up by Fonterra in 2008. Since 2022 it has been owned in equal shares by Fonterra, the New Zealand stock exchange NZX and the European Energy Exchange EEX.

At each event, sellers offer fixed quantities per product and per contract period, which is the month of shipment. Bidding takes place in several rounds with rising prices: in each round, buyers indicate how much they want at the current price, and the price goes up as long as demand exceeds supply. Products offered include whole milk powder, skimmed milk powder, butter, anhydrous milk fat, cheddar, buttermilk powder, lactose and sweet whey powder. Prices are in US dollars per tonne.

Between the main events, GDT also runs smaller, shorter auctions called GDT Pulse, introduced in 2022.

Why GDT results move the market

• New Zealand is one of the largest exporters of dairy products, and Fonterra is the largest seller on the platform.
• The results are public, appear right after each event and are based on actual transactions.
• Dairy futures traded in Oceania use GDT results as their reference.

Whole milk powder accounts for a large share of the volume and has a strong influence on the overall index.

What GDT results mean for a European trader

• A direction indicator. A series of rising or falling events says something about global demand and Oceania supply. European prices follow their own supply and demand, but large differences with Oceania prices affect export competitiveness and, over time, European prices.
• Not your contract price. GDT prices are for specific products, delivery from New Zealand or other origins, and shipment months ahead. European quotations (for example from ZuivelNL or EEX futures) are closer to your own market.
• Currency. GDT prices are in USD. Convert them at the current exchange rate before comparing them with euro prices. See How do you manage currency risk when you buy in USD and sell in EUR?
• Seasonality. New Zealand milk production peaks in spring in the southern hemisphere, around October. Offered volumes at GDT follow that pattern.

Using GDT results in practice

1. Look at the results per product after each event, not only the index.
2. Compare them with European quotations for the same products.
3. Hold them against your own open positions: if you are long in a product whose price is falling, the value of your position is falling with it. See What is mark-to-market and why does every dairy trader need it?
4. Use the results in conversations with customers and suppliers as a shared reference for market direction.

GDT and your own positions

Comparing GDT results with your book only makes sense if you know your own position per product and period. In Moo Software, the position list shows what you are long and short, based on live contract, order and stock data. That makes it possible to see right after an auction which positions are affected. See also How do you track your position in dairy ingredient trading?

See it with your own data

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