Using Global Dairy Directions

Global Dairy Directions (GDD) offers an invaluable tool for dairy processors, milk brokers, dairy traders, food manufacturers and dairy sector investors.  It offers the following insights:

When the market is likely to turn?

The GDD offers a total view of projected trade in dairy commodities. It provides a rolling forward projection (monthly over two or more years) of the most likely scenario of the balance of trade for major dairy commodities (tonnes of product) and in terms of total milk equivalents.

This allows users to assess the fundamentals of the market situation and outlook for major commodity groups.

It allows users to assess the prospects and risks associated with the likely timing and scale of a “turn” in the market. This is useful as an input to:

  • business strategy and planning
  • risk management
  • advice to their own customers and suppliers

MTI

What matters most?

There is a multitude of signals that constantly come from the dairy trade, industry news and releases of all forms of supply chain data. Sorting the important indicators from the noise is a key advantage offered to users by our service. The trade simulator is an option in our service offering which allows a user to quickly understand the relative significance of changes in key variables, forward assumptions and risk factors that affect the market balance in the short term and long term.

It allows rapid development of “what-if” scenarios which can be tailored to need, based on the user’s own specific business intelligence from market sources.

When using the DTS, a subscriber can save and compare future scenarios, such as “high and low” views on variables.

What matters most

What does it mean for prices?

Sentiment and perception have a major influence on short-term spot prices for dairy commodities, as many buyers operate without any visibility of the total market situation and outlook.

Our market tension indicator has demonstrated over time to be a reliable lead indicator of spot prices for traded commodities. The simulator allows a user to draw on a relationship between these variables, and to assess the likely future pricing implications based on market fundamentals. These are drawn from clear relationships observed between prices over time, and key variables affecting the future balance of trade – changes in milk supply, manufacturing product mix, importer demand and domestic demand for dairy products in major exporting regions (affecting export availability).

We have been able to use this analysis to demonstrate the risks associated with “false signals” that have affected market sentiment in recent times, while fundamentals were unchanged.

European SMP prices

Trends in trade

The focus of the GDD service is the future, but much can be learned from the trends in recent trade.  Our simulation tool is at all times informed by the most recently-available trade data from exports by all major dairy exporters – which region exported what products to which markets.

Past trade trends are a guide only to the future.  They show important relationships between prices and import demand over time which reflects the relative price-sensitivity of different markets.  They also provide guidance as to whether stockpiling is apparent – seen in 2014 and 2015 after heavy buying at low prices into several key regions – as a guide to future market appetite and supply chain capacity.

Our simulation tool, containing a global trade map, provides a large resource of these trends, with a further option for users to obtain deeper drills into specific needs through a desktop inquiry tool.

Trends in trade