FMP launched to report traders' views of the markets

Published 19 August 16

Forward Market Performance (FMP) is AHDB Dairy’s new market indicator which monitors the difference in current market prices and prices traded on futures contracts*. Luke Crossman, Senior Dairy Analyst, says “The aim is to provide some indication of what those trading futures believe the supply and demand relationship could be over the coming months.”

The comparison is between an AMPE price and a Future Milk Price Equivalent (FMPE) price. Both are quoted in Euros to limit exchange rate implications, as there are no Sterling futures prices. FMPE is calculated in the same way as AMPE, but using futures prices from the European Energy Exchange. “FMPE is calculated four months in advance of AMPE as this is generally where most of the trade is completed. FMP does not tell us how much milk prices will change by, but, combined with other market commentary, can give an indication of the potential movement, or trends, in prices.”

“FMP is the relationship between AMPE and FMPE, it’s about the traders' views of the potential supply/demand relationship in the future. Therefore, a negative figure indicates that those involved in the futures market during that month feel there could be relatively high supply and the market will become supply focused in the coming months. A positive figure means those trading futures believe supply will become tight, pushing demand and causing the market to become demand focused.”

AHDB is keen to remind commentators that it’s important to remember, at present, the amount of product traded through the futures market is small.

*futures prices are settled prices from the European Energy Exchange (EEX)