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Host 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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Hello everybody. Welcome back to another GDC Tuesday.
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I am your host, Cody Costa, with me from Chicago, Mr. John Spain.
00;00;15;03 – 00;00;22;21
Howard, John, how are you today? Doing great. Cody, I’m happy to be here on this frigid, frigid February 18th morning.
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Yes. Well, we are happy that you made it in the office. You could join us for.
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A.
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Little global dairy trade analysis. As we were talking beforehand, kind of a ho hum.
00;00;32;02 – 00;00;35;29
DDT as you will, but as an aggregate still down.
00;00;35;29 – 00;00;46;24
5% on the GDP on the volume side. And if we look at the overall change in prices actually up 1.7%. So a little bit of a mixed emotion in there.
00;00;46;29 – 00;01;10;06
It is Cody. And I would just say you’re correct. It was a relatively uneven fall auction. More of consolidation if you will, from last auctions pricing action. The volume was lower and the volume will continue due to move lower, likely as we move through the season here. You know, we got most of the volume that we’re going to see.
00;01;10;07 – 00;01;32;09
We got a sold off on the high end. And now we go into a period of decreasing offers as we move forward. So we either need to see demand go down or if demand stays the same then prices are able to move up. And on this one I would say we were relatively balanced. It feels like we saw demand step back a little bit, as well as as we noted, the supply stepped off a little bit.
00;01;32;09 – 00;01;47;21
I would just point out something that I do think is interesting. The amount of time that it took to get through this auction was two hours and eight minutes. The amount of time that it took to get through the last auction was two hours and 43 minutes. So if anything, you can just see that we went through the auction faster.
00;01;47;21 – 00;01;56;21
That’s probably noting that, hey, there was just a little less competition and a little less reason for the auction to drag out, as long as it did on the last auction.
00;01;56;21 – 00;02;05;27
Absolutely. Well, is there any plays? And it was kind of a lackluster, you know, GDC as far as outside kind of looking at it. But is there a product that really stuck out in your mind on this one that moved?
00;02;05;28 – 00;02;22;02
You know what? This is something that we kind of alluded to on the last auction, and I’m going to try to make sure that we’re more dialed in on it moving forward. We tend to look at the skim milk powder. We tend to look at it through the lens of, hey, the result here is the New Zealand skim milk powder price.
00;02;22;02 – 00;02;47;01
And in fact, the result that we see on the auction now has become an aggregate of powder that can come from Europe, power that can come from the United States, and powder that comes from New Zealand. While we do see the aggregate number published by the GT, we’re actually able to see the individual regions as well. And something that I neglected to point out on the last auction was that New Zealand SMP actually went to $1.36.
00;02;47;04 – 00;03;10;19
It was up substantially as compared to the European price, which was roughly about $1.15. That was important for two reasons. A we saw prices actually go up a little bit on more than we would have reported, but it also put New Zealand at $1.36. Well, as of that time last week, the US was out of dollars 34. So for the first time in several months, the US price was not the highest in the world.
00;03;10;19 – 00;03;30;12
In fact, it was New Zealand. And well, it wasn’t a big crack in the door. It was enough to open the door a little bit to say, oh, maybe the US price is open the door for the rest of the world to go up. At the same point in time, the European price was at $1.15. If I look at it in this auction here, we’d say the skim milk powder price came down 2.9% right.
00;03;30;12 – 00;03;51;08
And the average price that we’re going to see published here is $1.25. But when we get into the forensics and dig in there a little bit, we see that the New Zealand price, which is probably the most important when we’re looking at this get we’re going to point out that that came from $1.36 down to $1.30. So we went up from $1.29 on the last auction to $1.36.
00;03;51;08 – 00;04;12;18
And on this auction we came back down to about $1.30. We did not see the European price move that much, and it still remains around that dollar 15 area. So not to really nerd out in here or get too far into the nuances of this auction, but I do want to point that out that the New Zealand price made a big pop up open the door, comes back down.
00;04;12;18 – 00;04;34;19
Now and is at $1.29. And right now our price is at $1.28. So New Zealand is still the highest price in the world, but not by much. And there is a lower price alternative in Europe. And that’s at about $1.15. As we look at the other products that we saw trade today, whole milk powder down 0.4%. Let’s just call that flat.
00;04;34;19 – 00;04;57;19
Right. But what I will point out is if we look at it versus expectations of where the futures were, I would say that it came out, a little bit higher than what the expectations were. Futures, if you remember, after the last auction exploded higher here in the course of the last 3 or 4 trading sessions, they have lost a substantial amount of their price.
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And I’m guessing that after this auction, they’re going to regain those losses that they took here in the last, few days. When it comes to the fat side of the equation, a little bit slower in here. AMF down 0.6%, butter up 2.2. I do want to point out that again, we see butter which is 82% butter fat at 7378 a ton.
00;05;23;23 – 00;05;46;19
If we look over at AMF, which is 99%, at least 99% butter fat, where it’s $6,723 a ton, you have to scratch your head when you see butter at a $600 per ton premium to AMF. Again, it’s not unheard of to see this. It’s just kind of rare, especially when you see that price point widening instead of decreasing like we thought we might have seen in here.
00;05;46;19 – 00;06;14;04
And then finally when we moved to the cheeses cheddar cheese down 3.2%, we’ll call that about a 221. On an average, mozzarella was point 2% lower at about $1.88. I would point out that on the mozzarella side, we have seen over the counter trades on the X for European markets that are equivalent to about that 188 price. So I would say that price is very much in line with the rest of the world.
00;06;14;05 – 00;06;27;04
I’d say the cheddar side of things at 221 is a little bit on the high side compared to the rest of the world, but if you have somebody that needs New Zealand cheddar and this is the place they have to go to get it, I think that’s what’s helping keep that price a little elevated.
00;06;27;06 – 00;06;48;26
But as I mentioned, as we kind of jumped in, I should have done it the opposite way, I apologize. Yeah, I thought I probably threw you off as I went with the event volume change first instead of the actual price change. But look at the event volume change down 5%. Do you think that had more of a bigger part to do with why the auction itself was sped up for the last couple ones, a little bit less of an auction time frame, I guess we could say.
00;06;49;00 – 00;07;05;13
Most definitely. I think it was just less product for sale. But I would also point out that there’s less demand, right? I mean, I seen the demand go down seasonally. There’s a little less competition out here as of right now. That could change, but I think there’s a little less competition, a little less to sell, and we just didn’t see things drag out as much.
00;07;05;13 – 00;07;25;12
I would also point out that if you look at the ever AG Insights GDP analysis, you can see on there not qualified bidders, participating bidders. So there are 182 participating bidders on the last auction. On this auction, only 165. So there were just a few less people participating as well.
00;07;25;19 – 00;07;31;15
Let me know, was there anything else big that stuck out to you on this GTI? That there wasn’t a whole lot of excitement or fireworks per se.
00;07;31;15 – 00;07;49;21
But I guess I would just say you know, on this one, we probably saw China pop back up versus the last auction. That last auction was pretty slow, right? Particularly when it came to China. They were up 15% versus the last auction, but still down 31% on a year over year change. And I think that’s something we really have to monitor.
00;07;49;21 – 00;08;11;03
We’ve been looking at it the same way. I think China’s back and at times it’s felt like they are. I would look at it on this time and say, still down 31% year over year. And if you remember correctly, last year’s volume wasn’t so hot. So we continue to see a little bit of declines on here. The Middle East, while they were a little bit last versus the last auction, they’re up 50% on a year over year basis.
00;08;11;03 – 00;08;34;08
So the Middle East is stepping in. And Southeast Asia they were down versus the last auction. But 0% change versus last year. I really do think we’re going to see how China participates here. If China continues to be lower, I think we’re going to struggle for the prices to go higher. But my sense is, is that’s what we’re going to see that they were here to buy during the high tide of offerings on the auction.
00;08;34;11 – 00;08;57;24
And now that tide’s moving out, we’ll probably see them pull out of here and maybe we’ll see them disappear for a while. We’ll see how that works. Nevertheless, I don’t want to take away from this auction. Right. Some of the prices were down, as we pointed out, on the aggregate number, we were actually up. But I would look at it and say, this is more consolidation than anything specifically as we look at it, compared to the last auctions, prices, which saw everything move up.
00;08;57;24 – 00;09;03;29
There, no auction is too little or too less when it comes to price now in the dairy industry. As for darn sure.
00;09;04;01 – 00;09;12;24
Yeah, again, I would just say it’s a consolidation and it says, well, maybe the price is about right where it’s at and we’ll see what it’s going to take for prices to move up or down from here.
00;09;12;24 – 00;09;30;12
Awesome, John. Well, again, we appreciate you being here kind of diving into the global dairy trade for everyone. Our next auction is going to be in two weeks on the 4th of March. So we’re not quite to that three week jump yet. So got two weeks out for the next GDT. We look forward to seeing everyone at appreciate everyone tuning in and listening.
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If you have any questions for John or myself, please feel free to email in and we’ll try to answer those to the best of our abilities. But until next time, have a great week and even better weekend and we’ll see you on the next global Dairy Trade auction analysis.
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