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The unexpected weakness in prices for whole milk and skim milk powder at this week's GlobalDairyTrade auction prompted market participants to accumulate a record volume of dairy derivatives on the NZX. Most of the jump was in the options to buy or sell the products.
Record volume was 6415 lots on July 3, according to data from NZX Dairy Derivatives. That broke the previous record in 2015 by 5994.
At the GlobalDairyTrade auction on Tuesday night, prices dropped, led by an unexpected drop in whole milk powder.
The auction took place after Fonterra Co-operative Group, one of the biggest players in the market, published production figures show that its New Zealand milk collection increased by 7% over in the previous year to reach 71 million kilograms and is expected to increase by 1.3% for the 2018-1919 season. Skim milk powder fell 7.3% to US $ 1905 per tonne and skim milk powder 4.6% to US $ 1913 per tonne, prompting Amy Castleton, AgriHQ dairy analyst, to believe that the market was "nervous".
Yesterday, the market had a record day: people wanted to step in and manage their risks, "said Nigel Brunel, Director of Institutional Products at OMF. I have been waiting for but there seems to be a lot of millet Around the world, New Zealand is getting ready for a good season. "
Some 4,000 contracts were options, the largest volume in at least three months, based on NZX data, a similar volume of futures contracts traded a week earlier, also a three-month high. was the busiest day for option trading since May 2015.
Contracts are for one metric ton for GDT-based contracts and 6000kg / ms for New Zealand milk price contracts
] "It was" nice to see record levels of activity "in dairy derivatives.
" Higher Volatility at Recent SLM Auction Leads to Large Volume Trade. "
NZX said its data showed that the majority of options traded yesterday were to strike $ 2900 and $ 3000. The purchase options, which give the owner the right to buy the underlying commodities at an agreed price , are trading at $ 3,000 and selling at $ 2900, a put option at a given rate and time.
to be marketed as structures. "He stated that participants generally use options as insurance if the price moves against them, without having to engage in such a position.
Traders use contractual structures to meet their needs, including a necklace, where the keeper seeks to put a cap.
Inside of it, there is a "long necklace", where the trader buys a buy option and sells a put option, and a "short necklace", where they take the opposite position.June's data show that the notional value of dairy products traded increased by 16% compared to June 2017 to $ 132 million There were 26,417 negotiated futures contracts, up 10% and 7332 option lots, up almost 30%. increased from 18% to about 28%.
Salt In the case of Brunel, market participants are also actors in the dairy sector and hedge their real risks and potentially offset positions elsewhere, such as: long in the futures market or to offset risks in the real spot market. OMF clients are looking for structured positions and Mr. Brunel declined to comment on actual transactions.
Market players range from producers and sellers of milk to distributors and buyers of dairy products. Until last week, volatility in the market had actually decreased, he said.
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