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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00;00;00;00 – 00;00;23;19
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. Hello everybody. Welcome back to another Get Tuesday Happy Tax Day. For those of you listening in America, I am Cody with me from Chicagoland and Mr. John Spainhour. John how are you today doing well Cody, and thanks for reminding everybody that it is Tax Day.
00;00;23;19 – 00;00;46;12
What an awesome day. Get your taxes in or don’t I mean hey at this point who really cares right? Yeah. Pay the consequences. Well we had a positive GDP this morning on the 15th of April here up 3.2% change from last auction two weeks ago. You’re going to hit on it. But the big movers I’d say the big standouts were going to be whole milk powder up 2.7%.
00;00;46;12 – 00;01;09;08
We also had skim milk down 2.8% on this auction. Yeah. Let’s get into the nuance of things here, because there are some things that, once we dig in, probably a little bit stronger than what they appear. Let’s start out with the fat side of things. Butter was up 1% at 348. And if we go to AMF, that was up 2% to 310.
00;01;09;08 – 00;01;31;00
Putting both of those together. And that is substantially higher than where the current CME spot butter price is trading at 235 right now. Ish 235 ish. If we put that into context, we would say that just continues to keep that door for exports open. And I know we’ve all been on the sidelines thinking, are we going to get exports, are we not?
00;01;31;00 – 00;01;52;01
Our February export report showed us that we are indeed seeing some exports now. Was there in February when we weren’t sure we saw upwards of 10 million pounds of exports. And since that point in time, we’ve had people tell us there have been some more exports booked. I look at this result and say this continues to be supportive to the idea of further exports in butter.
00;01;52;02 – 00;02;12;19
As we go into the cheese side, one might look at that cheddar side and say, down 1.9%. You know, a little bit of a pullback there down to 223. But I think it’s important to look at mozzarella. Mozzarella is probably, the one that we’re going to compete with the most. I know this is on the GDP and we tend to associate that with New Zealand.
00;02;12;19 – 00;02;42;18
But what I can say is here this mozzarella price is an EU mott’s price that is traded on the GDP. It went up 5.4% today and settled out at 216. I think that’s very important because the US cheese price coming into today’s spot was 184 and barrels 177 in blocks. Right. So to see our main cheese type category of competition go up to 216.
00;02;42;18 – 00;03;06;01
That continues to keep that door to exports open as well. And again we probably missed a few exports in March, but when we got down to $1.60, chances are we probably did book some pretty decent exports down there. Tariffs no tariffs I think we still got some off. And it’s tempting to say, well then if we got exports then the rest of the world probably will go lower on this auction.
00;03;06;01 – 00;03;28;03
Right here what we see is mozzarella actually went higher. And it continues to keep that door open to exports here in the US. Let’s move to the powder side. Whole milk powder 2.7% higher. That’s an easy one to say. Well that’s 2.7%. Yeah. Higher that. Nothing special there though on that number. But I would say that it really defied expectations.
00;03;28;03 – 00;03;46;19
Expectations coming in from the futures. We’re looking for about a 6% lower result on whole milk powder today. And in fact it came in 2.7% higher. I guess I would look at that and say we really defied expectations. Why were the expectations so low? I think a lot of it comes off of the behavior of pulse last week.
00;03;46;19 – 00;04;04;22
We’ve mentioned before that pulse tends to be a very China centric auction with not a lot of other participants. And then when we get to the big auction that we had today, we’ve got not only China, but other participants that are coming in. When the other participants aren’t there. It feels like the price on the pulse kind of drifts lower.
00;04;04;23 – 00;04;26;12
But when we get to the big auction and they’re there and China’s there, it seems that we move a little bit higher or defy expectations. We’ll get into it in a minute, but we’ll say China was here, but they certainly weren’t a featured buyer or somebody that’s behaving. That should have been the price driver here. And then as we move to skimmed milk powder, we mentioned last week, the skim milk powder was such a weird one.
00;04;26;12 – 00;04;56;26
There was an ultra high temperature result we saw on the front end, ultra high temperature skim out of New Zealand, traded as much as like $2.30. Just way out of line with everything else. We saw that price come back down here today. However, I would point out that if we’re really trying to compare apples to apples, we want to look at those medium heat prices and I would say New Zealand medium heat today on the front end went to $1.30 on the C2 contract and a $1.33 on the C3 contract.
00;04;56;26 – 00;05;25;08
Both of those are decent, pretty decent results. And I would say both of them kind of came in within or slightly above price expectations for that time period. So when we look at the US nonfat price at one 1675 versus that new Zealand price out there above 130, you know, you say, boy, the door is probably open there as well for some exports of skim.
00;05;25;08 – 00;05;45;29
So I would say the skim milk powder market probably did better than expected. Again, if when we look at what the published price here is, it’s going to say skim milk powder was down 2.8% down to $1.27. I think it’s important to keep in mind that that is an average of the European and New Zealand price that dollar 27.
00;05;45;29 – 00;06;12;13
New Zealand actually coming in above $1.30 and that’s well above the US and the EU as well. So all in all I would look at this and say a pretty darn supportive auction. And I think that as you mentioned, Cody, that shows itself out here with the weighted average price being up 3.2%, you got hit on the little bit, John of China being back the volumes by region total event volume was down a little bit.
00;06;12;13 – 00;06;36;10
But China event change 8% lower. But the winning bids in 46 of the 115 winning bids, which was another leaderboard for them there. You know they’re here. But look on the on an event to event change down 8% on a year over year change down 15%. You say well okay so it wasn’t China who was there. The Middle East did a little bit better here on an event change.
00;06;36;10 – 00;07;15;15
But look you’ve got Europe showing up in here up 14% on an event change up 169% year over year. Certainly. That’s probably coming off of a small base at that 169. But Europe continues to be here. We continue to see them. Source product out of New Zealand, probably taken into Southeast Asia, maybe a little bit in the China, maybe some of it’s some tariff busting or some tariff changing origins where they might take U.S. product that has tariffs into a country that doesn’t, and then maybe taking the Europeans buying New Zealand product and taking that into countries where there is a tariff on the US.
00;07;15;15 – 00;07;34;25
I don’t want to say that’s exactly what’s happening here, but I do think it’s important to point out, to see Europe showing up here, I think is kind of something that’s moving the needle a little bit. And there’s other reasons that they might be here. If we look at German and French, milk production continues to be down, up over 2% on a year over year basis.
00;07;34;25 – 00;08;02;11
That’s a result of bluetongue. And at the same point in time, you’ve got foot and mouth disease starting to become slightly more prevalent. And Slovakia again, we really want to go out of our way to say, I’m not saying that foot and mouth disease is spreading rapidly, or it’s going to have a big effect. But one of the potential risks that presents is that there are a lot of countries that have it in their inbound import documentation, that they cannot take product from a country that is known to have foot and mouth disease.
00;08;02;12 – 00;08;27;05
If we can imagine a world where this spreads out of Slovakia into the rest of Europe and becomes more prevalent there, that becomes a risk to some of these countries that they might not be able to take product from Europe. Some of these European suppliers might be taking some product out of New Zealand, just because they need to keep their supply line pretty diversified here to take it into countries like Southeast Asia, where those laws exist.
00;08;27;07 – 00;08;52;14
So you just kind of shift the chess pieces around the board on who’s getting the imports and exports of. That does continue to spread. It does in longer term, you know, how are you want to look at it. It could be bearish Europe in the short term bullish New Zealand in the US. But I think longer term it stands to be bullish just out of in my opinion because as you go to eradicate this disease you could have a loss of milk production in Europe.
00;08;52;14 – 00;09;11;04
And that’s just longer term structurally somewhat bullish. Absolutely. Well we appreciate you hitting on that big key point that’s happening overseas right now. So besides everything that we talked about so far John, is there anything else that really stood out to you in this April 15th GDP that we just had? I have to say this was not the result that I was expecting.
00;09;11;04 – 00;09;46;02
I thought we’d be a little bit down, but supportive. This one actually turns around and comes in looking relatively strong. And again, when we look at the potential that this presents, the US butter market is the cheapest in the world. The US skim market is the cheapest in the world, the US cheese market cheapest in the world. I think what this report or this auction stands to do is kind of continues to present the US as a value supplier at this moment in time, and even with some of these tariffs that are still out there as a threat, it can mean something.
00;09;46;02 – 00;10;16;29
But I think one of the things I look at is a lot of the countries where there was a tariff threat to US products, those threats are at least been shifted down the road a little bit. So they’re still out there. China still does take some U.S product the way market is probably the most exposed of any of the US products, but for everything else, I would look at it and say the US is going to present itself as a bargain here to the rest of the world, and we should probably expect exports on all of these products to continue and or start to grow.
00;10;17;00 – 00;10;36;05
Okay. Well, John, appreciate your deep dive into the global dairy trade today. As always, we are going to be back with everyone actually in three weeks or in two weeks. We have ADP conference on May 6th. Is the next GDT auction again in three weeks. That’s when John and I will be back with everyone. We appreciate everyone. Two men listening.
00;10;36;06 – 00;10;48;06
Give us a like a share. Let us know if you have any questions comments concerns. But until next time everyone have a great week. Even better weekends we’ll see you next time.
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