GlobalDairyTrade beefs up offering with multi-seller pools of US lactose products

Tuesday 26th September 2017

Fonterra Cooperative Group's GlobalDairyTrade platform, which has moved more than US$20 billion in dairy products since it launched in 2008, is looking to broaden its offering to meet customer needs.

“We are continually innovating and always looking for these expansion ideas,” Eric Hansen, director of GlobalDairyTrade, told BusinessDesk.

On one front, GlobalDairyTrade is expanding its services by hosting its first multi-seller pool which will offer US-sourced lactose products during the GDT auction on Dec. 5.

The participating companies are Agropur Inc, Hilmar Ingredients and Valley Queen Cheese. Hansen said the multi-seller pool will join the standard twice-monthly auctions and the results will be published in the same way.

High-quality food-grade US lactose will be offered within the pool as three standardised specifications including Mesh 40, Mesh 100 and Mesh 200. Sold in 25-kilogram bags or 1000kg totes, each product comes with the same high-quality standards, assured through consistent plant certification and independent product testing, according to GDT.

Under the system, buyers can bid on the pool lactose product and while the identity of participating sellers will be published, some individual information will remain confidential, such as whether a seller is participating in a particular trading event, or each seller’s offer quantities.

Currently, all sellers on the GDT auction are individually identified. Sellers include Amul, India’s largest dairy and food brand, Arla Foods, a global dairy cooperative owned and run by milk producers in Denmark, Sweden, Germany, Luxembourg, Belgium, the Netherlands and UK, Arla Foods Ingredients, and Fonterra.

Hansen said GDT will shortly be making an announcement about a new seller joining the platform.

The US lends itself to multi-seller pools as the US dairy market has the advantage of being “fairly uniform, fairly homogenous in terms of quality standards,” he said.

A second wave of lactose sellers is expected to join to increase the volume of lactose on offer and after that GDT will look at how to apply the model to other products in the US.

“It is a bit early to be confirming anything on that – but that’s certainly the intention,” he said.

On another front, GDT recently inked a letter of intent to evaluate a new auction mechanism for dairy products in Europe with the European Energy Exchange – EEX. The aim is to create a credible auction mechanism designed for the European market.

EEX offers financially settled futures on skim milk powder, butter and whey product. Hansen said the talks were very much at an “early stage” but the idea is to link into the GDT events platform in some way.

“We are very much going through the consultation process to see what the needs of the buyers and sellers are and we will design that to meet their needs and as much as possible we will leverage off the existing auction,” he said.

Hanson said a key reason for working with them is that they are established in the European market and have credibility in that market.

“What we are finding is that each market does have its own needs. In the US, around the multi-seller pools, the main needs are around the confidentiality of individual information. For Europe there is a greater need for more distinct European characteristics,” including how the products are offered and how the auction operations, he said.

“We will bring a lot of consistency in terms of the way we go about it, the transparency and the credibility of the underlying auction mechanism,” he said.

On another front, Hanson said he was upbeat about the GDT marketplace, an initiative launched in June 2016 that is 24/7 market where a seller can list any product at any time.

While the GDT auction is about large-scale, generic price discovery that offers a credible market-based reference price, the GDT marketplace is more about individual transactions, Hansen said.

He declined to comment on how much volume is going through but said there are now 10 sellers and 233 buyers.

“We are very happy, it’s growing very strongly and the outlook is very positive.”

(BusinessDesk)

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