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.

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00;00;00;10 – 00;00;08;19
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;08;21 – 00;00;16;17
CODY
Hello everybody. Welcome back to another GDC Tuesday. I’m your host, Cody Costa. With me, Mr. John Spain. How are John? How are you today?

00;00;16;19 – 00;00;19;13
JON
Doing great, Cody Excited to be here. As always, we.

00;00;19;13 – 00;00;25;27
CODY
Are happy to have you here on this higher GDC Tuesday to get a great insight from your side of things.

00;00;26;04 – 00;00;47;27
JON
Thanks, Cody, Let me start out. You are correct. We were 2.8% higher on the GDP composite index today. This will be the first auction in the last three that we are going to end significantly higher. A few standout trades that I can point to today. First of all, whole milk powder, always the big dog of the show here was up 3.3%.

00;00;48;01 – 00;01;09;05
JON
I would state that that is important simply not only because we have such a gigantic weight on that as it relates to the auction, but we would also say that milk counter far exceeded expectations almost powder based on the futures, the SGX futures. We’re looking for another decline at one point in time between now and the last auction.

00;01;09;05 – 00;01;35;12
JON
It was looking for about another 5% decline. Again, we not only didn’t decline it, we were up 3.3%. So I think that is truly the surprise of today’s auction as we move to skim milk powder came in, believe it or not, as a little bit of a disappointment, even though we were up 1.3%, futures were looking for a little bit more than that, up into that 3% higher range, only coming in at 1.3% higher.

00;01;35;13 – 00;02;04;09
JON
That comes in at $1.16 per pound on a dollars per pound equivalent. Now, AMF on the fat side was up 2.1% and most importantly, butter was up 2.9%, butter coming in at $2.99 on an 82% fat basis. This is some of the strongest butter numbers we’ve seen in quite a while. And here and then finally, as we move over to the cheese side, cheddar cheese up 3.5%, coming in at $1.97.

00;02;04;09 – 00;02;10;17
JON
Mozzarella did not have a change from this past week. I don’t believe anything traded.

00;02;10;17 – 00;02;20;22
CODY
Well, yeah, that’s the one thing that kind of caught my eye this morning is mozzarella. We’ve had the past few sessions. We’ve had some trades in mozzarella, some decent ones, and then today just absolutely nothing.

00;02;20;22 – 00;02;36;26
JON
You know, I would just say that mozzarella is one of the newest products to the Getty auction. And I think there’ll be from time to time, we’ll probably see something like this. And then when we do finally trade, we’ll see quite a large price adjustment from the last trade when something finally does trade. But I wouldn’t look too far into it.

00;02;36;26 – 00;02;43;25
JON
The volumes associated with both mozzarella and cheddar cheese are very small as compared to the other products.

00;02;43;25 – 00;02;55;19
CODY
We kind of talked about this before we jumped on you and myself, John, but as far as volume is traded for everything, it wasn’t necessarily a gangbuster of a trade for all commodities on the street, correct?

00;02;55;19 – 00;03;20;02
JON
Yeah. This is, again, we always get into that half glass full, half glass empty. And I guess it depends on which glass you’re drinking out of. But I would look at it to say that prices did go up on this auction. Clearly, some of the players that we haven’t seen, the two active in the last few months here kind of step back in the Middle East, pick up their volumes there, 31% over the last auction and 10% higher on a year over year basis.

00;03;20;03 – 00;03;42;12
JON
North Asia, who we would consider to be China, they were 16% higher on an event change. Yet still 42% lower than the last auction. And then finally, I would say Southeast Asia down 24% on an event change and down 9% on a year over year basis. The reason I point this out is having the Middle East and North Asia stepped back and they played an important role.

00;03;42;12 – 00;04;01;18
JON
And at the same point in time, their volume stepped up and yet the amount of volume that was sold on this auction was 5% lower than the last auction in that time of year when volumes are already low. This one was even lower that the one two weeks ago. So we did have some increased activity yet lower volumes.

00;04;01;18 – 00;04;28;04
JON
We certainly should have seen prices go up as a response and they did. But I think we just want to look at that with a little bit of a side I hear, and say, I mean, can we really get too excited about it when the volumes are as low as they are? I would also point out that collectively throughout the year here through this is event seven, I believe as we look at some of the stuff that was put together by ever AG Insights Total Northeast Asia purchases through event number seven.

00;04;28;05 – 00;04;51;19
JON
This is the lowest they have been since 2016. So if we look at our cumulative year to date, we can feel it, we can see it. We’re very low. But when we compare it to history, we haven’t seen the cumulative Chinese purchases this low since 2016. I think that is an important thing to look at. I think it just says a lot that they’re just not here and they’re not buying with any sort of vigor.

00;04;51;26 – 00;05;05;11
CODY
It’s switching away from cheese for a second. John. Looking at butter, we had butter closing at about 299, which our price in the United States was slightly under that four spot today. But butter up 2.9% year.

00;05;05;11 – 00;05;25;25
JON
You bet. The butter world is just doing very well, not just here in the U.S., but as you pointed out on the GDP and in Europe has been moving up as well for here in the US. This is the highest price we’ve seen since November ten. And if you remember, November 10th, that’s really when we’re coming out of our demand season, Right?

00;05;25;25 – 00;05;44;18
JON
So here we are at 292 at our highest price that we’ve been at since November 10th. And it’s April 2nd. You know, we’ve traded here in the U.S. several times up against that 285 area, bumped up against it, bumped up against it, and then it looks like today we finally broke out. I think there are a number of different reasons why that could be the case.

00;05;44;18 – 00;06;15;07
JON
The idea of saying, well, we went higher today because the GDP price went higher is an alluring thought. I won’t take that away from the market. Certainly people could have responded to it. I just think there are a lot of other things going on in our domestic market, probably are taking our price higher as well. What I would point out though, is while I don’t think we’re going to get exports here at 292 of any significance just because New Zealand’s up to 99, if New Zealand and Europe continue to move higher in border, I think it’ll be hard for the U.S. to disconnect from it.

00;06;15;07 – 00;06;38;06
JON
Not necessarily because we got exports, but more so from the threat of getting exports. If we get too disconnected and our price becomes too cheap as compared to those other regions, you can bet your bottom dollar you’re going to get some international buyers in our market. And I think what we’ve seen many, many times is it only takes a small amount of exports to get our butter market moving.

00;06;38;06 – 00;06;55;05
JON
So if we were to disconnect from the rest of the world and capture any amount of even marginal exports, that could be something that takes the price higher. But I would say as of yet, I don’t believe that today’s response, nor the area that we’re at in general with butter pricing has much to do with the international market.

00;06;55;08 – 00;07;01;03
CODY
All right. That’s some good insight on the butter bean. Is it fair to say butter in the world is pretty much on fire at this point.

00;07;01;07 – 00;07;26;13
JON
Is feeling very strong. I think there’s just good demand for it. I think that, you know, there’s just a lot of different people looking for it. I think New Zealand has done a nice job of trying to really move away from whole milk powder. And because of that, they’ve been making more butter and skim, they’ve been making more cheese, they were making other things and I think they’re finding demand for that and I think that’s very important right now.

00;07;26;13 – 00;07;35;03
JON
I would look at it to say the fact that we are at our highest price of the year so far and it is April 2nd, I think that’s a statement all unto itself.

00;07;35;07 – 00;07;41;09
CODY
I would agree, especially going into what we would consider the quote unquote flush months here in the States.

00;07;41;09 – 00;07;42;02
JON
That is correct.

00;07;42;05 – 00;07;48;25
CODY
Well, we can hit on pricing and the purchases by region. Is there anything else on this auction specifically that stuck out to you?

00;07;48;27 – 00;08;12;03
JON
Not really. Again, it is good to see the market find some stabilization in here and certainly to see some of those participants like China show back up. When we looked at the headlines today or coming into this morning, it looks like there was some signals out of China that their economy might be finding its footing. And we can look at that and say, hey, that’s going to lead to demand.

00;08;12;03 – 00;08;26;22
JON
And, you know, certainly they did show up today with a little bit more volume, but it’s still far too early for me to look at this and say today was a watershed event, that we found the bottom of the market. I just I’d like to see how the market reacts when there is a lot more volume on the auction.

00;08;26;22 – 00;08;36;05
JON
And that is something that we will start seeing the further we move into the year as New Zealand starts to put more of their volumes up on the GTI.

00;08;36;07 – 00;08;53;10
CODY
Awesome. Well, as usual, John, we greatly appreciate your insight into the global dairy trade. John and I are going to be back in two weeks right smack dab in the middle of April is going to be the next auction. But until then, we appreciate everyone tuning in. Have a great weekend and even better week. We’ll see you next time.

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