Mixed signals ahead of GDT 397: Bullish futures and increased supply

Since the previous Global Dairy Trade (GDT) auction, market sentiment has remained broadly bullish. Event 397 may provide further direction, while international dairy futures markets in the US, the EU, and to a lesser extent SGX have shown mixed trends.On the production side, the global dairy sector is experiencing a record year. The main producers and exporters, New Zealand, Australia, Brazil, Argentina, the US, the UK, and the EU, have recorded a combined year-to-date (October) incremental milk production increase of 7.65 billion kilo, representing a rise of 4.7%. Milk production Incremental Qty. (thousand tons) Total volume (thousand tons) YTD EU 1659 134220 November USA 2547 102453 December NZ 398 21531 December Australia -175 8417 December UK 696 14184 November Argentina 1028 10590 December Brazil 1492 18561 December Total 7645 309956 Nov/Dec +2.47% Compared with the winning prices from the previous GDT auction, calculations based on SGX Dairy Futures suggest meaningful upside potential if Event 397 results align with futures prices under the “all contracts” method. However, this upside appears significantly more limited when applying the “C2” method.Key market insightsNew Zealand milk production: Year-to-date (November) milk production is up 1.85%, equivalent to an increase of 398 million kilo.SGX dairy futures: Market sentiment has generally become more mixed in recent weeks, except for New Zealand dairy futures. Under the C2 method, average prices for fat-based commodities increased compared with Event 396 winning prices, while both Whole Milk Powder (WMP) and Anhydrous Milk Fat (AMF) futures declined versus the average winning prices in Event 396. Under the all contracts method, only AMF moved lower.Volumes and product mix: With the new season underway, offered volumes remain substantial but declined compared with Event 396. Total auction volume for Event 397 is 19,791 tons, down 26.53% from the previous event, despite the inclusion of Butter Milk Powder (BMP).Exports: Year-to-date exports (December 2025) are up 0.35%, or 72 million kilo in liquid milk equivalent (LME).Expected price impact: If Event 397 results match SGX Futures pricing, the GDT price index could decline by 0.80% under the C2 method, but increase by 4.5% under the “All contracts” method.Composition of volumes: Whole Milk Powder dominates offerings in Event 397, accounting for 56.6% of total volume. Price movements in WMP will therefore have a significant influence on overall market sentiment and the GDT index.Global outlook: Dairy futures in the US and the EU have continued along a mixed trajectory, while SGX prices have strengthened in recent trading sessions, apart from WMP.Futures developments: Since the last GDT auction, average futures prices across contracts C1–C6 have moved higher relative to the average winning prices from Event 396, except for AMF. AMF -2.66% SMP 15.52% Butter 0.44% WMP 3.29% Overall, Event 397 is characterized by a broadly bullish outlook when viewed through the lens of futures market pricing. However, the strong increase in global milk production may reduce the likelihood of a sustained bullish outcome in the near term.