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.
[bg_collapse color=”#004053″ icon=”arrow” expand_text=”Show Transcript” collapse_text=”Hide Transcript”]
(Transcript auto-generated)
00;00;00;10 – 00;00;08;20
Future trading involves risk and is not suitable for all investors. Content provided in this segment is meant for educational purposes and is not a solicitation to buy or sell commodities.
00;00;08;22 – 00;00;16;10
Hello everybody. Welcome back to another Game Tuesday. I am your host, Cody Koster, with me from Chicagoland, Mr. John Spain. Howard, John, how.
00;00;16;10 – 00;00;19;26
Are you today? Doing great, Cody, and very excited to be here.
00;00;19;26 – 00;00;41;21
We are happy to have you here on this April Fool’s Tuesday. But today’s DDT no April Fools came in 0.1% higher as an aggregate. Yet there were a couple other nuances in there that you and I had kind of been talking about before we jumped on here. But if you could, John, just give us a little bit of a rundown on what happened today is you bet.
00;00;41;21 – 00;01;06;21
Cody, let’s start out with the easy stuff, if you will. Butter down point eight coming in roughly around 3:45 a.m., F up 2.2 roughly around 304. I would say two things. One is both of these prices are well above the U.S price still. And at the same point in time, the AMF price. I would view that as being at a significant discount to the value that’s represented in butter.
00;01;06;21 – 00;01;30;12
Remember, AMF is like 99% butterfat. Butter is 82% butter fat. Just that alone says that, you know, if we’re valuing it on butter, AMF should be higher than butter or theoretically could be higher or on par with butter. It is not is still trading at a pretty significant discount to it. So to see that spread close in a little bit not a surprise, but I think there’s still a lot of work to do when we go to the cheese side of things.
00;01;30;12 – 00;01;53;21
Mozzarella is down 4% coming in at 205. That is isolated to just a European mozzarella price. We’ll talk about that in just a minute here. That came down about 4% again the 205 getting over to the cheddar side. That was up 0.8 to $2.28. That is going to be a New Zealand price cheddar side. So we can say New Zealand cheddar went up a little bit.
00;01;53;21 – 00;02;11;18
We can say EU mozzarella came down a little bit. Pretty decent spread forming between those two. But as we compare that to the US, both our blocks and barrels are hovering right now about $1.66. It’s when we get over to the powder side that things get a little bit more interesting. I’m going to start out with whole milk powder.
00;02;11;18 – 00;02;35;02
Whole milk powder came in at a seemingly uninteresting point 2% higher. And you can say, well, nothing special about that. But when we look at where futures were trading coming into this auction, futures were trading significantly lower. They were looking for about a 7.5% decrease in some of these futures. And we actually came in higher on the day.
00;02;35;02 – 00;02;56;09
So I would say that was a major surprise on this auction, just not something that I don’t think many people were looking for. Again, you can say, well, it only came in slightly higher, but when we view it up towards expectations, we can say it really beat those expectations. When we moved to skim milk powder, the headline here up on our side is up 5.4%.
00;02;56;09 – 00;03;24;15
That is the headline. You know, we have a way that we calculate it, and it’s slightly different than the way that the New Zealand GDP calculates it. But what we really want to look at here is break this down in terms of the regional elements that go into this composite. We would say the European number came in on this one relatively unchanged, came in about $1.16 actually just slightly lower than where our nonfat price is right now.
00;03;24;15 – 00;03;45;24
But the New Zealand price is the one, I think, that defied expectations. First of all, the GDP pulses suggested that that would be going down to about $1.25. So we came in at $1.30. I would say if we compare this to the futures prices where they were at, we came in slightly above where futures we’re looking for. That is a good thing.
00;03;45;27 – 00;04;06;25
But one of the bigger surprises in here that’s breaking it down by the region of New Zealand and the EU. But even within the New Zealand price, something that really seemed to skew things here is that there is a ultra high temperature price that went in here and it traded, believe it or not, for some reason on the front end I don’t like to get into inside baseball here.
00;04;06;25 – 00;04;26;03
It traded as high as 236 on the front end. Now there is normally a premium associated with the US. I don’t know that it needs to be over a dollar. There was a fat finger there or maybe kind of an auto purchasing program that went into effect. Nevertheless, there was a very, very high print that went into that up.
00;04;26;05 – 00;04;46;27
It is part of the official indexing, if you will, of where prices came in at. So again, looking at the headline, it’s tempting to say, oh my gosh, we really exploded higher. What I really want to take away from this is New Zealand. Medium heat is at a $1.30. European medium heat is at $1.16 US medium heat, nonfat is at a dollar 17.25 right now.
00;04;46;27 – 00;04;48;29
That’s really the way I’d like to sum that up.
00;04;48;29 – 00;04;58;03
So even because of the higher trade in the specialty product, it rolled itself into the skim milk powder essentially being showing itself that much higher than what it was.
00;04;58;03 – 00;05;14;12
That is correct. But I would say that the New Zealand medium heat did come up slightly, and it did defy expected actions. So there is a bullish element there if you want to read it. I just wouldn’t look at that price and say, boy, we’re off to the races here. Yeah.
00;05;14;12 – 00;05;34;02
No I understood. Now you and I had been chatting. I think you mentioned this actually on the last auction is the offers on the volumes kind of decreasing, the GDP a little bit. Now, is that something? I know this is going to be hard to dive into, but with tomorrow being the second and possible tariff implications coming on, do you think that has a little bit to do with that side of the story?
00;05;34;05 – 00;05;54;25
It does get a little bit squishy in here. What I will say is, is that seasonally we see volumes start to decrease, right. We’ve been through high tide of New Zealand volumes that are on offer now. We’re slowly waning into that low tide side of things. And one thing we can say is, is that there was less on offer today than there was versus the last auction.
00;05;54;29 – 00;06;16;25
I believe it’s 10% lower, if you will. We should continue to expect that to happen. But what we do see in here is some buying is a little bit more sustained. We would say you’ve got decreased offers, but maybe the demand hasn’t gone down quite as much. Again, let’s not lose sight of the fact that home powder was essentially unchanged and skim was essentially unchanged, right?
00;06;16;25 – 00;06;37;26
So I don’t know that it was like a huge upwards effect that we’re seeing in here, but I will say Southeast Asia 20% higher versus the event two weeks ago, a little bit lower year on year. And then China, we can say 2% higher than the last auction, but 19% lower on a year over year change. So I don’t know that there’s a whole lot happening.
00;06;37;26 – 00;06;58;09
And there again, we’re seeing volumes come down and just steady ish volume. Our demand side of things is enough to to be relatively supportive in here, if you will. But to go to your question there, Cody, about tariffs tomorrow, we are expecting or it has been stated that there is going to be an announcement of tariffs as they relate to the US imports.
00;06;58;09 – 00;07;17;08
Those tariffs right now, you know, we don’t know exactly what they’ll look like and what countries they’ll be imposed on. And what we also don’t know is if we put a tariff out there, there’s an expectation that we’ll see reciprocal tariffs, you know, against US products, dairy to be included in that. But we don’t know what countries might reciprocate and what countries might not.
00;07;17;08 – 00;07;43;00
And we don’t know to what degree they might put those reciprocal tariffs on there. There’s a lot of unknowns. And I think Phil on our team has summed it up really well by saying nobody knows nothing at this point in time. And I think we want to keep that in mind. But to answer your question, there is a very significant chance that you’ve got some buyers out there who might buy out of the US saying, I don’t know what the tariffs might end up being for my country or to the country that I want to ship it to.
00;07;43;01 – 00;08;09;03
So I might be looking to source that product from some country other than the US and possibly showing up here on the Getty. Understood. With that being said, though, another bugbear that has entered the equation is foot and mouth disease. And this is a disease that has started to break out slightly in Europe. And I really want to maintain that are really stress that it’s slightly it’s the first time we’ve seen it in over 20 years.
00;08;09;03 – 00;08;27;07
There was one case that broke out earlier in the month in Germany, and then they said, oh, it’s contained. It’s not going anywhere. And then since that point in time and Hungary and Slovakia, we have seen five cases show up and one of them showing up on a farm of pretty decent size. A few things to this one.
00;08;27;07 – 00;09;06;21
This might not spread any further, right? We don’t know that we’re already at five. We have to have the expectation of the possibility that five becomes ten and ten becomes 30. Right? We hope that doesn’t happen. We just have to keep our mind open to that idea. There’s a few things to it. One is that one of the factors involved here is, is that in contrast to bluetongue and to bird flu, which largely had an effect on production per cow but had a low mortality rate, this disease once it’s contracted, not only is the cow that has it euthanized, the entire herd is euthanized and herds surrounding that herd can be euthanized.
00;09;06;26 – 00;09;13;12
It’s a big spreader. I mean, I think that’s to your point of euthanizing everything. Being cautious is what is happening over there right.
00;09;13;12 – 00;09;39;25
Now, being cautious. But as it relates to our markets and again, this is I don’t want to get too far out over our skis. I just I am someone who admittedly was not on the the job or on the spot, if you will, as much as I should have been as it relates to bird flu and the effect that it can have and how fast it spread, when we look at this, we have to look at it through the lens of it can have, it can spread, it can cause cows to be euthanized while they try to eradicate this disease.
00;09;39;25 – 00;10;01;15
And at the same point in time, you have export destinations that have it codified into their import licenses. They cannot accept product that comes from a country that has foot and mouth disease. Okay, so what you can run into is a country that would be importing product from Europe that is no longer allowed to accept that product. In the short term.
00;10;01;15 – 00;10;14;02
You could say that’s bearish, possibly for the internal European market, but that buyer might have to go find product somewhere else. And in the meantime, as they do that, where are they going to go? That’s the US and that is New Zealand.
00;10;14;02 – 00;10;32;09
It seems like the two biggest factors are also the two biggest unknowns that you talked about tariffs possible tomorrow possible we don’t know. And the foot and mouth disease which no one honestly knows if it’s going to spread any more how far it’s going to spread. But those are like two of the biggest items, I think that people are looking at overseas in here.
00;10;32;11 – 00;10;51;15
That is correct. And I don’t know that we saw that show up here on the GDP today, you know, as it relates to prices. But I think New Zealand powders performed better than expected. Cheese performed a little bit better than expected, European cheese performed less than expected. And European skimmed milk powder, you know, did not perform as well.
00;10;51;15 – 00;10;59;29
So again, we might start to see a little bit more of a dichotomy between New Zealand prices and European prices. And the US.
00;11;00;03 – 00;11;04;08
Definitely down a lot there. John, is there anything else in this auction that kind of stood out to you?
00;11;04;09 – 00;11;20;02
No, I think we did cover a lot. It’s a lot that’s been on our mind here lately. And we’ll see. I will just say whole milk powder performed way better than expectations. And for that matter, skim milk powder did too. Let’s not get carried away with the headline of that skim milk powder result for sure.
00;11;20;02 – 00;11;37;28
Well, as always, John, we appreciate the deep dive into trades that are outside of our norm here in the States. The next GDT is going to be actually on the 15th of April in two weeks. And that’s when John and I are going to be back with everyone. In the meantime, we appreciate you guys tuning in. Share with all your colleagues, all your friends.
00;11;37;28 – 00;11;45;01
Give us a thumbs up. Let us know if you have any questions. But until two weeks from now, you guys have a great week. Even better weekends. We’ll see you then.
[/bg_collapse]
The following music was used for this media project:
Music: Funky Intro 29 by TaigaSoundProd
Free download: https://filmmusic.io/song/9520-funky-intro-29
License (CC BY 4.0): https://filmmusic.io/standard-license
Artist website: https://linktr.ee/taigasoundprod
© Ever.Ag 2023, confidential and proprietary.
This episode is also available on the following
platforms:
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.
