Cody Koster and Jon Spainhour take a deep dive into this week’s GDT report.
Questions or comments? Contact Jon at jcs@ever.ag, Cody at cjk@ever.ag, or give us a call at (312) 492-4200.
00;00;00;10 – 00;00;09;02
VOICEOVER
Future trading involves risk and is not suitable for all investors. Content provided in the statement is meant for educational purposes and is not a solicitation to buy or sell commodities.
00;00;09;05 – 00;00;19;03
CODY
Hello everybody. Welcome back to another Getty podcast. I am your host, Cody Koster, with me from Chicago. Happy New Year, Mr. John Spain Hour.
00;00;19;05 – 00;00;23;15
JON
Happy New Year to you, too, Cody. And let me tell you how excited I am to be here.
00;00;23;21 – 00;00;29;24
CODY
Well, we’re excited to have you, I guess, on the global dairy front, New Year, same kind of auction results. So we’ve been seeing.
00;00;29;24 – 00;00;47;15
JON
Yeah, yeah. As I was seeing you earlier, I came in today excited for anything to happen to give us some color on the international dairy front. And I’m afraid that in general I’m going to have to write this off as another bit of a no nothing auction experience today.
00;00;47;19 – 00;00;56;09
CODY
Yeah. So for the products side, John, is there anywhere we want to start anything that really jumped out? I mean, looking at the numbers, there wasn’t anything to too exciting, I guess.
00;00;56;10 – 00;01;12;16
JON
Yeah. Let’s start out with the whole milk powder side of things. Homeopath. It was up 2.6%. This is the fifth event in a row that whole milk powder has been up. So this was good. And if we were to look at where the pulse was pointing to and where futures were pointing to generally in the right direction on this one.
00;01;12;16 – 00;01;31;07
JON
So if we were to look again at the big dog of the auction in terms of volume, it’s whole milk powder and whole milk powder was up. That is something that we can say. All right. There is something to really look at, even though 2.6% is certainly no huge victory, I would point out that it is higher and it is a continuous version of the higher trend we’ve been in.
00;01;31;07 – 00;01;53;11
JON
As we look at the other products, we would say, well, AMF was up 0.3% and butter was up 1%. In both cases, futures were looking for a little bit more than that. We don’t have a pulse. But I would say that while these were higher, they came in short of the expectations set by the futures market, getting into the cheese market here, down 2.3%.
00;01;53;11 – 00;02;23;22
JON
If you remember, two auctions ago, we made a pretty big climb from one six and started climbing. And then the last auction, we got up to 191 ish. We pulled back on this 1 to 189. Again, I never like to look too far into the cheese trade on the GTI simply because so little is traded. However, we’ll have to say that this is the second auction in a row where we’re up in this 190 area and that seems to be showing some pretty good consolidation up here.
00;02;23;22 – 00;02;51;12
JON
And then finally, skim milk powder going to sell the day point three lower at 119. I do want to remind everybody, though, that this is an index of European, US and New Zealand skim milk powder at this point in time. If we were to look at New Zealand skim milk powder specifically, I should say it came in around 116 while European powder came in about 123 and that got us to our average of 119.
00;02;51;12 – 00;03;12;21
JON
So kind of the lead vanguard skim milk powder product out in the world. B in New Zealand is at the lowest price in the world at about 116 and edging lower Overall, though, as you pointed out, Coty, we’re at 1.2% higher on the index. So another higher index result, albeit only 1.2% higher.
00;03;12;23 – 00;03;24;07
CODY
And I think looking back, is this our third or fourth higher auction in a row, which we’ve kind of done this dance before where we have, you know, three higher auctions to lower and then we kind of creep our way back up like a little bit of a roller coaster here.
00;03;24;11 – 00;03;50;06
JON
If you can find a trend in there, sir, that you’re willing to rest your hat on. My hat’s off to you. I’ve really been in there looking for the same type of thing. And it’s just I don’t know what to make of a slightly higher auction than slightly lower. It just feels like if I were to take anything away from the pricing action, I would have to say that the international price of dairy, at least the GDP prices seem to have consolidated in the general area that they’re been at for about the last 2 to 3 months.
00;03;50;09 – 00;04;05;28
CODY
So I guess one trend to kind of look at, John, is purchased by region China not quite there in the buying seat yet again, this auction, we had some interesting numbers coming out that we did internally looking back year over year on where China has kind of been volume wise.
00;04;06;05 – 00;04;25;24
JON
Yeah, there’s always a desire maybe to say, well, whatever China was doing at the end of the year, they’re going to pick up their volume as we move into the new year or something’s going to change and the government’s going to change the program or they’re really going to pick up the pace here. And if you were somebody that was looking to this auction to give you proof of that, you were very disappointed.
00;04;25;24 – 00;04;51;00
JON
I had to look at the numbers twice just to make sure. But if we compare Chinese volume as compared to the same auction last year, down 53%, if we were to look at Chinese behavior as it pertains to the last auction, down 21%. So that just really stands out, you might say, well, then who picked it up? Well, the middle East was up 115%, but that’s really not that different.
00;04;51;00 – 00;05;09;10
JON
And then we would say Southeast Asia was down 3% year over year and up 2% on an event change. I mean, I guess I would just look at this and say I feel like the demand was relatively lackluster here. It’s just we’re getting into the time of year where there’s less supply. And I think the result is we got a steady auction.
00;05;09;10 – 00;05;25;08
JON
And again, I just want to point out the workhorse of the buying being North Asia and or China down 53%. So coming end of the year for anybody looking for, while that’s going to be the switch for China to buy more, I would say at least for right now, this auction says otherwise.
00;05;25;15 – 00;05;33;06
CODY
Well, New year short podcast here, John. But was there anything that really stuck out to you on this? A little bit of a sleeper of a get this time?
00;05;33;11 – 00;05;56;00
JON
Well, I guess, again, we seem to have consolidated out here. We would say that in general, I think the ever AG Insight has pointed out so well over the past 2 to 3 months that listen, demand is on the weaker side of things. And I think we see that specifically out of regions like China. And at the same point in time, we can point to the U.S. and we can point to Europe where milk production is suffering as well.
00;05;56;00 – 00;06;21;04
JON
And so you put those two together and right now the demand picture seems to be winning. However, I would just say if we were to imagine a world where demand stepped back up into any sort of normal level or just recovered from where it’s at today in the face of today’s milk production, which looks like it might get worse based on prevailing spot prices, we could be out looking at a pretty big rally out there into the future.
00;06;21;04 – 00;06;43;20
JON
Again, that would be based on the idea that demand comes back in into a steady to lower supply that we’re dealing with right now. And that’s something that can really create a lot of action in spot prices. However, there’s a lot of ifs and buts and wins in that argument. And for the time being, we have to say demand is not great, supply is not great and has reason to probably get worse.
00;06;43;20 – 00;06;58;17
JON
But right now we can only go with what we know and demand is kind of ruling the day. And as a result, we’ve got a U.S. cheese price here in the mid one forties and a skimmed milk powder, nonfat powder price at 161 17. So I think we really have to keep that in mind.
00;06;58;24 – 00;07;15;16
CODY
Awesome. Well, John, appreciate your insights on this first global dairy trade of 2024. We are two weeks out from the next one, so we’re going to have one on the 16th of January. That’s the next time John and I will be back with everyone. But until then, have a great weekend and even better week and we’ll see you next time.
Disclaimer: TRADING FUTURES AND OPTIONS ON FUTURES INVOLVES SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THE INFORMATION AND COMMENTS CONTAINED HEREIN ARE PROVIDED BY EVER.AG AS GENERAL COMMENTARY OF MARKET CONDITIONS. THIS INFORMATION SHOULD NOT BE INTERPRETED AS TRADING ADVICE OR RECOMMENDATION WITHOUT FURTHER DISCUSSION WITH YOUR EVER.AG ADVISOR. THIS IS A MATTER OF SOLICITATION.
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