GDT Index down 1.6% but why hasn’t the average price changed?

Published 7 January 16

The first Global Dairy Trade (GDT) auction of the year showed a 1.6% decrease in the overall Price Index on 5 January. However, the average price remained unchanged from the previous auction at $2,458/tonne. So why has one measure of GDT price fallen, yet the other has stayed the same? And which figure is more accurate?

The difference can arise because of shifts in the volumes of products traded. Changes in volumes between auctions can skew the average price. For example, if a higher volume of a more expensive product is traded, this can cause an increase in the average price even if the prices for each product have not changed.

The GDT Price Index calculation looks to remove this skew by using the ratio of prices between the two auctions. This ratio is then weighted by the volumes traded at each auction. For those interested in the mathematical detail, it is available on the GDT website.

In summary, the GDT Price Index gives a more accurate reflection of the price movements between auctions. The weighted average price simply gives the overall price achieved in the auction for all the products sold.