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Don’t Get Too Excited About GDT Upturn

That’s the read from HighGround Dairy’s Eric Meyer. Meyer writes; After a four month collapse adding up to eight straight losing auctions and shedding 25.8% of its value during that timeframe, the GDT Price Index finally settled higher at this week’s trading event. Broad gains were seen across most commodities with exception of SMP and AMF. But even within the skim milk powder category, advances were reported across nearly half of the individual results across sellers and delivery months.

 In our comments two weeks ago we predicted that a global market bounce was due as buyers stepped in to lock down contracts ahead of the southern hemisphere’s production season. With the northern hemisphere production peak in the rear-view mirror, buyers looking to re-build their inventories for the second half of the calendar year at cheaper prices from earlier this quarter are currently helping to support markets in Oceania, EU and the US.

We also believe that dairy users are taking a more aggressive stance with their positions for the remainder of 2014 and even dipping their toes into 2015 ahead of schedule to prevent mistakes made on hedges (or lack thereof) in 2014 which is also lending support.

However, we believe it is important to note the rebound in auction prices this week was quite muted for how sharp the decline has been over the past four months and by NO means suggests a change in the medium term down trend has occurred.

Read more of Meyer’s analysis by writing him at: dairy@highgroundtrading.com.