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.
(Transcript auto-generated)
00;00;00;10 – 00;00;09;01
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;04 – 00;00;17;07
CODY
Hello everybody. Welcome back to another GTA Tuesday. I’m your host, Cody Koster, with me from Chicagoland. Mr. John Spain, our John.
00;00;17;07 – 00;00;19;23
JON
How are you doing? Great. Cody Happy to be here.
00;00;19;27 – 00;00;37;24
CODY
David Happy to have you here. Well, it’s actually Wednesday, the 21st right now, day after the auction. But John and I are going to take a little look back at what happened at event 3504, the GDP. John, the interesting part you and I were talking about as a whole six higher auction in a row.
00;00;38;00 – 00;00;58;15
JON
You know, we barely squeak by on this one on the total aggregate came in at point five higher, as you noted there, Cody, this was the sixth higher auction in a row on the aggregate. Did lose some steam, though, as compared to the big increase that we saw last auction of 4% or higher.
00;00;58;16 – 00;01;06;21
CODY
So we kind of had a mixed bag of tricks here between skim and butter, cheddar cheese. Is there any one specific that you want to dive into first?
00;01;06;26 – 00;01;38;13
JON
You know, I guess it’s just important to focus on the big dog of the whole show, and that’s going to be whole milk powder. Whole milk powder had been going successively higher and higher, had moved higher on the past six auctions. And then finally this auction, we broke that streak. Homo powder settled down 2.2%. Not a huge break by any means, but that kind of winning streak that it had been on over the last six auctions and really going all the way back to August, it’s been on a higher and higher move.
00;01;38;13 – 00;02;06;12
JON
We finally did see a little bit of slow down there when it comes to the expectations for whole milk powder. We came in right about what the pulse was suggesting. The pulse was suggesting an average price of 336 $0 per metric ton. We came in at 3388, so we were right in there on the mark. When it comes to skim milk powder, you know, we were looking for 2770 and we came in at 278 $8 per metric ton.
00;02;06;12 – 00;02;37;27
JON
So that was 1.1% higher. And I would say that was again, right in line with what the pulse was expecting. As we move over to the fat market, Butter came in at 0.2% higher at $2.96 per pound, and then AMF came in at 8.6% higher at 297. If you remember, on the last auction, butter took off. Ambev really didn’t this time AMF did a little bit of catch up and butter was generally pretty stable.
00;02;37;27 – 00;02;58;22
JON
And then finally, as we move to the cheeses here, we’ll say mozzarella up 5.3% to a dollar 80. You know, we’re still learning our way around the mozzarella auction on here. There’s a very limited volume and it’s a newer product, but it was up 5.3 at 180. On the cheddar side. Cheddar, if you remember, it was relatively explosive on the last auction.
00;02;58;22 – 00;03;14;18
JON
This time it settled back down 7.3%, coming in at 188. So big move higher in cheddar. We found a ceiling there, pulled back, but the mozzarella price going up. And again, cheddar at 188, Matt’s at 180. Starting to find some equilibrium in those prices.
00;03;14;21 – 00;03;26;03
CODY
Now, I think you and I talked about this before a little bit on a previous show, John, but between cheddar cheese and mozzarella, the world primarily kind of focuses more on a mozzarella price as far as trade goes, correct?
00;03;26;07 – 00;03;48;07
JON
I think there’s a lot of different ways to look at it, and I think you’re in the right ballpark there. Cody I would say mozzarella is what we specifically want to look at in the U.S. as it pertains to our exports. It seems the more our exports seem more tied to mozzarella prices than cheddar prices, there could be other regions of the world where cheddar is the benchmark.
00;03;48;07 – 00;04;13;01
JON
But I think you’re absolutely right. And St Marts is that number that we probably want to keep our eye on. The price prices at a dollar 80, it’s a relatively limited volume, so we don’t want to put too much credence into it. But it does suggest that the max price out there is in that area and with the U.S. prices down in the mid one fifties, it does suggest that we should be able to see some mozzarella exports at some point in time.
00;04;13;02 – 00;04;37;02
CODY
I guess. Switching over to purchases by region. John North Asia purchases grew 28% from the last auction, but the Middle East actually fell 66% from the last auction. I mean, if you look at it on a chart, it’s just completely going against each other on those purchases. Can we finally say that China might not be back as much as they had been previously, but maybe they’re back in the buying seat, getting us a little bit more product moving?
00;04;37;04 – 00;05;01;13
JON
Well, there’s no doubt about it that China was here on this auction, but I guess I would be hesitant to say that it was a great performance on their end. You did note there in your commentary, Cody, that North Asia or what we refer to as China was up 28% on an event over event change. However, when we look at it on a year over year change still down 31%.
00;05;01;13 – 00;05;17;16
JON
So they’ve been down and down and down and down over the course of the last year or so. And finally we did get a little bit of a pop up here on their volume. But I think it’s still important to note that it’s still significantly less than it was on the year over year auction. So maybe this is the beginning of a trend.
00;05;17;16 – 00;05;35;19
JON
If there’s something that we’ve learned the hard way many, many times on this show, Cody, is it’s just hard to predict a trend when it comes to China’s buying. We want to see it really play out. And again, they were here. That is important to note. At the same point in time, their volume not anywhere near where it was last year at this time.
00;05;35;20 – 00;05;57;01
JON
Cody, you noted that the Middle East, their purchasing was down 66% on an event or event change. I think that’s very important to note because if we go back to the last auction, their purchasing was up so significantly and it had somewhat of an outsized effect on pricing in terms of why the Middle East was purchasing so much on the last auction.
00;05;57;01 – 00;06;18;03
JON
What we’ve been able to pick up in the anecdotal reports is a lot of it had to do with shipping. There’s a lot of problems with shipping a product coming out of Europe into the Middle East due to piracy concerns or terrorism concerns on the high seas, if you will. And people were saying it was just easier to pull it out of Oceana and bring it across into the Middle East.
00;06;18;03 – 00;06;44;05
JON
That way, whatever the reasons may be, they weren’t really here. This auction. So again, down 66%. And I think if China had not shown up, we would have seen a much lower auction than we did. The fact of the matter is, China did show up. They were here. And that is, you know, an important thing to note before we move off of this, I would point out that Southeast Asia, they were up slightly on a event over event, but down 18% versus a year over year.
00;06;44;05 – 00;07;05;00
JON
So, again, let’s go back and look at North Asia In China, down 31% year over year. Let’s look at Southeast Asia, still down 8%. Again, a positive auction. And important to note that we did see some purchasing show back up out of China, but still not seen that overall widespread purchasing coming out of the big buying regions.
00;07;05;03 – 00;07;12;01
CODY
Well, John, I mean, there’s some good information leading into this auction. Is there anything else that really stuck out to you for the DDT that we had?
00;07;12;05 – 00;07;34;00
JON
Not really kind of a ho hum auction? I would say another thing to point out is that volumes were down 2% on the overall offering. So we saw China show up again with some relatively okay volume volumes were down and prices on the overall went up 0.5%. I’m not going to walk away from this saying that’s negative by any means.
00;07;34;00 – 00;07;57;18
JON
Again, I just have to stand back and look at that and say, I would have thought we would have seen more and maybe we already saw it on the last auction when we went up. And we’re just stabilizing. But again, I would just point out that that was not a huge signal strength, at least in my mind, on pricing as it comes here to the U.S. Again, I would point out that nonfat here in the U.S. went from the highest pricing factor in the world to now.
00;07;57;18 – 00;08;04;27
JON
New Zealand is 126 and we’re at 119. So we went from the highest and now we’re well below New Zealand.
00;08;05;04 – 00;08;18;28
CODY
Awesome. Well, John, we appreciate the insight into the global dairy trade. We will actually be back with everybody in two weeks for the next first part of March. Until then, everyone have a fantastic week and even better weekend and we’ll see you next time.
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