In the era before Global Dairy Trade existed, buyers and sellers were struggling to understand what constituted a current market price in the midst of unprecedented volatility.
Director of Global Dairy Trade, Eric Hansen, says that during 2006 dairy prices were going through the roof and market participants faced high levels of exposure.
“They were in the unenviable position of striking deals that were almost immediately mispriced. That was leading to a lot of tension, and a strong business need for a credible, market-based reference price.
“At the same time, Fonterra Co-operative Group was considering changing its capital structure. It needed an objective, transparent methodology for establishing the Farmgate Milk Price paid to its farmer shareholders.”
In 2007, Eric established a team committed to addressing these challenges by developing an online global dairy auction platform.
The concept for Global Dairy Trade was to apply advanced auction methods to create a new sales channel for the marketing of globally-traded commodity dairy products. The key objectives were to achieve credible price discovery regardless of market conditions and to provide a tool for both sellers and buyers to manage commodity price risk.
The timing of Global Dairy Trade’s launch in July 2008 was challenging. While the first auction of Fonterra NZMP products delivered prices in the mid-range of expectations, the global economy was about to go into freefall.
The crash in global dairy prices occurred late in 2008 as the impact of the Global Financial Crisis took hold, says Eric.
“Prices fell at successive trading events through to February 2009. Then the recovery started. The result achieved in the first Trading Event provided proof of concept – we just had to hold on until the market hit bottom and turned.
“We kept the monthly sales going. That meant GDT Events provided price discovery in a world of huge uncertainty.”
Over time, additional sellers joined the GDT Events platform which is now a trusted and transparent platform for high-volume, high-quality generic dairy ingredients. By its 10th anniversary, GDT Events has facilitated the trade of more than US$22 billion cumulative value of dairy products to buyers from over 80 countries.
The global dairy market is constantly evolving – and the GDT team remains firmly committed to the principle of innovation that delivers enhanced services for buyers and sellers.
“Our conversations with customers indicated there was an appetite for a second online channel to complement GDT Events. It would offer greater flexibility, immediacy and privacy for buyers and sellers of smaller volumes, on a reliable, safe and secure digital platform.
“We are always looking for opportunities to broaden our services and provide more choices for connecting the world of dairy trading. After two rounds of formal market research to make sure we were aligned with customers’ needs, we committed to developing GDT Marketplace.
“We wanted it to act like a global shop front, connecting buyers and sellers and allowing transactions of any dairy product at any time, with no minimum quantity constraints. Customers told us that confidentiality was important to them. It also had to be easy to use,” says Eric.
The GDT Marketplace transaction models are highly flexible, and there are privacy options for listings and pricing. Prices for fixed price listings are only visible to buyers approved by the seller, and competitive tender result prices are not published. Considerable effort went into ensuring that the platform design and function were intuitive, and easy to navigate.
GDT Marketplace launched in June 2016 and now has 335 registered buyers, 15 registered sellers, and more than 5,904 listings completed across a broad range of products.
Looking ahead, Eric says that GDT has a clearly defined purpose - to help buyers and sellers trade with confidence in global and local dairy markets – which will guide future developments.
“Pursuing opportunities to attract more supply, enhance liquidity and create new business connections for customers will remain a focus of the Global Dairy Trade team as it enters its second decade of operation.
“We will continue to investigate more progressive ways of meeting the needs of all our stakeholders and promoting efficient and fair trade in global dairy and derivative markets.”
“Global Dairy Trade plays an important role as the auction platform for the dairy industry. Over the past 10 years, NZX has developed a close relationship with the team at Global Dairy Trade, and we congratulate them on a successful decade in dairy markets.”
Nick Morris, Head of Derivatives, NZX
“Global Dairy Trade is a critical price discovery tool that identifies the true market value of dairy commodities. It was a major innovation by Fonterra in 2008, and today the GDT Events platform is respected for promoting independent and efficient trade in dairy markets globally. Congratulations to everyone who has made GDT a success.”
John Wilson, Chairman, Fonterra
“As a member of the GDT oversight board and the leading access provider to the NZX dairy futures and options market, I am DELIGHTED to say thank you for addressing global needs and stepping up to the challenges that confront all of us. Happy 10th anniversary GDT.”
Robert Chesler, Executive Director, Global Dairy & Foods Group, INTL FCStone Financial
“Happy Birthday GDT!!!!! Keep up the great work :)”
Sascha Siegel, Head of Agricultural Commodities, EEX
“The experience of working alongside GDT to build out GDT Marketplace has been a truly satisfying process. GDT and its staff have a deep understanding of the market as well as the factors which affect both supply and demand.
From the very beginning, GDT has been keen to ensure Marketplace took the best of the b2c e-commerce experience and baked it into a b2b solution. We’ve enjoyed the forward-looking perspective from what might seem like (but isn’t) a traditional industry.”
Phil Bird, CEO & Mike O'Brien, COO, Perfect Channel
“Since our first offering of lactose through the GDT platform three years back, we have sold thousands of metric tons of lactose for the food industry across the globe in the bi-weekly auctions.
AFI joined the auction after expanding our lactose capacities significantly with the aim of establishing new sales channels in new geographical locations, but also with the ambition to create a solid benchmark for standard lactose in the global marketplace.
The GDT auction has worked great to service both existing and new customers in a smooth and transparent manner. We are proud of the development we have been through the last couple of years, where AFI and GDT jointly developed a new benchmark for lactose prices across the globe – both among suppliers and customers.
We believe our success on GDT can be ascribed to a consistency in our volume offering, supporting our promise to create a transparent and valid market price. The cooperation with the GDT Team has been excellent and we have always met open and qualified feedback.
Congratulations to GDT with their 10 years' anniversary, and we wish the platform all the best for the future.”
Luis Cubel, VP, Arla Foods Ingredients
“In my opinion, Global Dairy Trade is a great, modern initiative that meets the expectations of all participants of the international dairy market. Thanks to the determination and commitment of the entire Board under the leadership of Eric Hansen, GDT managed to create a unique global entity helping entrepreneurs from around the world in dynamic and effective development.”
Mirosław Szczepański, CEO, Polish Dairy
“My heartiest congratulations to the GDT team on their 10th birthday. It has been a very memorable journey for Amul as a seller. Global Dairy Trade has given us an excellent platform for increasing our global presence, especially in commodity trading. Over the years our association has grown stronger, and we have now started utilising GDT Marketplace to widen our reach. I look forward to adding more products on GDT Marketplace and GDT Events.”
K.M. Jhala, COO, GCMMF (Amul)
“I wish you more success and a very happy birthday!”
Hafid Brahma, CEO, Falait
“GDT Events has grown in many ways since the early days, and the platform has expanded to twice-monthly trading events, multiple sellers, hundreds of products, and hundreds of participating buyers. CRA has been fortunate to be part of the Global Dairy Trade success story in collaboration with others.”
Brad Miller, VP, Practice Leader of Auctions, CRA