Originally Posted by
belgarion
Sgt Pepper et al, just in case you weren't aware, the GDT (Global Dairy Trade) auction site has auctions from multiple suppliers. And the suppliers, e.g Fonterra, are generally NOT putting all their supply through GDT.
From memory, Fonterra has many long term supply contracts that account for the bulk of their production. Can't remember how much goes thru GDT, but if memory serves, its way less than 50%.
Consequently, and my apologies for not making this clear, in NZ we have some time before the prices on GDT affect the long term supply agreements. And of course, when these longer term supply contracts come up for renewal, the GDT auction prices might have gone back to record levels -possible but unlikely IMO.
Conversely, when the long term supply agreements are renegotiated, the suppliers may get forced into long term agreements below where near term prices are "likely" to go.
So ... prices are very likely to come down but its effect won't be as immediate as I might have led some to believe. Time frame, as indicated, is still 3-5 years before a new "equilibrium" between supply and demand is established. (Of course, further devaluation of the USD may look like in nominal terms prices haven't changed. ;) )