GDT Review with Jon Spainhour – April 16, 2024

April 17, 2024

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;15
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;17 – 00;00;17;20
CODY
It will everybody welcome back to another Good Tuesday. I’m your host Cody Koster with me from Chicagoland. Mr. John Spain. How’re John are you.

00;00;17;25 – 00;00;20;11
JON
Doing so Cody and so excited to be here.

00;00;20;12 – 00;00;32;13
CODY
We’re happy to have you here in this glorious, gritty Tuesday. It is the middle of April, actually the 16th, 2024, and we pretty much have a flat overall GDP this morning.

00;00;32;14 – 00;00;47;05
JON
That’s correct. The overall index came in at 2.1% higher. I think it’s about as close to flat as you can get without actually being flat. However, higher is higher, even if it’s 5.1%. Kind of a mixed bag against the commodities, though.

00;00;47;07 – 00;01;00;13
CODY
And I think, if I’m not mistaken, one of the biggest movers we had cheddar. So cheddar cheese down 8.5%. When you look at the whole gamut of everything that traded, I think that was probably the biggest mover of the day.

00;01;00;18 – 00;01;26;05
JON
Yeah. And I think we’ve had, say many, many, many times on this podcast as we examine the different cheese prices on the different indexes across the world, we have to be so careful when we look at cheddar on the GDP. If you remember the last auction, it was registering and I think at about 199 a pound, that was where the U.S. was at 140, it was very easy to say, well, hey, the U.S. is at 140, New Zealand’s at $2.

00;01;26;05 – 00;01;44;10
JON
We should get exports very possibly if we can. I’m not exactly sure that’s what happened here, though. In the past, there had been a very small amount of cheddar that had traded and that allowed the price to go up to 199 this week. Whomever those buyers were seemed to back off a little bit and prices come back down to 180.

00;01;44;11 – 00;02;10;28
JON
I will say skim milk powder futures had quite a rally baked into them. They were looking for around an 8% rally today on the GDP. And the net result is they came in at 2.4% lower at a dollar 15 a pound when we compare that to dollars per pound basis, Hormel powder futures, on the other hand, were forecasting that we were going to see a lower trade on today’s auction and in fact came in 0.7% higher.

00;02;10;28 – 00;02;36;28
JON
So skim milk powder really underperformed versus the futures and then the whole milk powder really overperformed versus the futures expectation. As we move over to the facts, AMP was up 1.8% and at the same point in time, the butter was down 0.7% and that registers in at about $2.97 on an 82% fat equivalent mozzarella cheese. Really no change.

00;02;36;28 – 00;02;43;25
JON
I don’t think it was anything that traded here today. If there was is a very small amount at about a dollar 70 a pound.

00;02;43;27 – 00;02;53;06
CODY
We’ve talked a little bit about this before. It’s hard to equate our cheese price to cheddar, so mozzarella might be a little bit better of a price to look at possibly on the GDP.

00;02;53;10 – 00;03;23;28
JON
Yeah, I think if we were looking at the kind of export versus export that we would be looking to compare, we would say mozzarella is probably the best comparison specifically when it comes to what we might go toe to toe with Oceana against. Again, we were at 140 and this is at 170. A case can be made that we took some exports from New Zealand and that could be part of what helped our spot price in the last week and today included move up into that 160 area.

00;03;23;28 – 00;03;49;23
JON
And at the same point in time, I think we have to be really careful about that. We know that there are some pretty sizable forward offers out in the marketplace for mozzarella out of New Zealand, July through December at about a 155 equivalent. So yes, this is the spot price at about 170. However, if we were to look at the forward basis of mozzarella, we would say probably more on a 1.55.

00;03;49;23 – 00;03;58;02
JON
While our futures here in the U.S. are 1 to 80 or above as we get out through the second half of the year. So just have to be careful comparing those two.

00;03;58;06 – 00;04;13;06
CODY
Absolutely. I just want to be interested. You know, we were talking about MATS in the one seventies and now we’ve got our cheese after today’s session at 151 for the BLOCK in the barrel. And as you had mentioned two weeks ago when we were on here, we were at a buck 45, give or take, in that range.

00;04;13;12 – 00;04;29;29
JON
It certainly is interesting and I’m not going to rule out the possibility that maybe we did get some spot exports and that helped us move higher. But to the best of our knowledge out there, we have not gotten those long term contractual export that are going to help keep the cheese market relatively cleaned up.

00;04;29;29 – 00;04;46;00
CODY
Understood. Well, as far as total purchases by region, down a little bit on this auction and what we would consider, you know, quote unquote, China still not back in the buying seat, but Southeast Asia, Oceania kind of picked it up a little bit on the buying side.

00;04;46;05 – 00;05;04;17
JON
You know, I mean, it’s just such a tough one. We all want to look at this and say, well, it’s China back. And this does indeed seem to be some news that came out of China from an economic standpoint that suggests they should be a little bit heavier of a buyer. But when we look at this auction, we see on a year over year basis still down 22%.

00;05;04;17 – 00;05;30;03
JON
And on an event change, down 13. When we look at maybe who is a standout buyer here, we can say, well, Southeast Asia was actually up 8% on an event change and up 5% on a year over year change. So Southeast Asia is probably the standout buyer on this one for the Middle East, who has been kind of a bit player here over the past, I don’t know, call it four or five months.

00;05;30;03 – 00;05;55;29
JON
They’ve kind of come in and out of the market and had an influence from an event change. They were down 16% on a year over year basis, down 66%. I guess one of the things you can say about this auction is, yes, there was decent demand here. I suppose even when we look at the demand metrics, when the auction opened up this morning from a total volume that’s offered, it still remains very light.

00;05;56;02 – 00;06;19;11
JON
And I would also point out that on last week, New Zealand made an announcement that they would be increasing the amount of whole milk powder that would be offered throughout the next season and into 2025. I think they increased it relatively significantly. And while it didn’t affect the amount of product that was offered on this immediate auction, it does affect how much product is going to be offered moving forward.

00;06;19;11 – 00;06;47;25
JON
And I think that kind of took the wind out of the market and people feeling like they need to chase this product. So more volume offered on the forward curve, if you will. And here in this immediate market, no change to the amount of volume that was offered, but it was still just seasonally very light. And I think that if anything kept us up, the fact that there was such a light spot volume here, if we were dealing with a seasonal volume, that we’re going to start experience here in a couple of months, I think we might have seen prices move a little bit lower.

00;06;47;25 – 00;06;55;25
CODY
Well, John, is there anything on this auction that really stood out into your mind that we haven’t talked about so far that you’d like to leave the listeners with?

00;06;55;28 – 00;07;21;25
JON
Nothing really? Cody I think it’s just kind of a status quo here and a ho hum. We’re going to keep a real close eye on this, right? Maybe we didn’t continue the rally on this auction, but we didn’t move lower. So possibly there’s some stability that’s come into the marketplace out here. I just can’t help but think that we’ve been able to find some stability finally on a decreased melt volume, something that I think we’re all watching very closely is European milk production.

00;07;21;25 – 00;07;36;11
JON
If that increases, which it has been doing recently, we may see some continued downside pressure here on the GDP, but we really want to see the where that plays out. So stay tuned and we’ll be sure and learn more about that as time moves on.

00;07;36;14 – 00;07;41;11
CODY
Awesome, Will John, as usual, man, we appreciate you being on, sharing the insights into the global dairy.

00;07;41;11 – 00;07;42;12
JON
Trade that we had.

00;07;42;12 – 00;07;56;28
CODY
This morning. And John and I are actually going to be back with you in three weeks. This is going to be one of those different teas where instead of every other, it’s going to be the third Tuesday. So we will see you May seven, 2024, same time, same channel. Until then, have a great week and even better weekend.

00;07;56;28 – 00;07;59;11
CODY
Everyone that you are tuning in, we’ll see you next time.

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