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;25
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;27 – 00;00;15;24
Hello everybody. Welcome back to another GDT podcast. I’m your host, Cody Koster, with me from Chicago, Mr. John Spain, our John, how are you today?
00;00;15;25 – 00;00;18;07
Doing great, Cody and super excited to be here.
00;00;18;07 – 00;00;24;00
We are happy to have you here on the 20th of May. The get back on this morning. And on.
00;00;24;00 – 00;00;25;12
An average.
00;00;25;12 – 00;00;38;10
Up 1.6%. Cheddar cheese saw the biggest retreat lower 9.3% lower on the day. But as an overall average for GDC, actually a little bit positive from the last auction that we saw.
00;00;38;11 – 00;00;57;27
Yeah. You know, Cody, if we look at the official index result coming out of the GDP, it’s -0.9. That’s going to be full body weighted. I suppose there’s a lot of obscure products in there and stuff that doesn’t necessarily trade every auction. When we look at the numbers that we’ve been calculating this off of, we were actually up 1.6.
00;00;57;27 – 00;01;23;10
But I would just say that in general, most of the individual big commodities were down slightly on this auction. The biggest loser of the day, though, was cheddar. It was down 9.3%, I think before we get too carried away with that one, we want to remember that last auction. I believe it was up 11 or 12%. So basically retraced a lot of its gains that it made.
00;01;23;10 – 00;01;49;19
But if we look at some of the other products in here, let’s start with the fat products. Butter was down 2.1, coming in about 355 on an 82% butter fat adjusted. When we go to AMF, it was actually up 0.8. And it comes in about $3.30. Again we’ll look at the butter side and say that’s 355. I think Europe is right about that same level in the US at 234, even after today’s auction.
00;01;49;19 – 00;02;16;07
Two 34.25 to be precise, when we go to the cheese side, as we pointed out, -9.3 on the cheddar side, a bit of a retracement compared to last auction’s big blow off there. However, another thing to point out is that mozzarella did adjust a little bit higher here and move to 217. As we’ve said a few times over the past few months, we believe that it’s more important to look at that mozzarella price than it is necessarily at the cheddar price.
00;02;16;13 – 00;02;49;07
The cheddar price is a good indication, right? It went up last auction to try to catch up with that European price came back down both the European price and the New Zealand price significant premium to the US share price. Even now, however, there can be a lot of differences in the specs and grades of cheddar from around the world when we want to compare apples to pretty much apples, we look at the mozzarella price and that mozzarella price again on the GDP coming in at 217, I would say this is actually mainly a European mozzarella price.
00;02;49;07 – 00;03;11;02
And when we look at some of the trading that has taken place in Europe over the course of the last week or so, 2017 is actually a little bit low. We saw some two 20s trade out there on the EU side. When we compare that to the US side, right. Even though we’ve made significant gains, we’re still at $1.90 and still at a discount to the mozzarella price.
00;03;11;02 – 00;03;34;14
I would say skim milk powder is really the one that I think gets pretty interesting. We’ve talked for a long time now about the difference in the EU price as compared to the New Zealand price on the GDP coming into this auction, we would say the EU price was down around 120, while the New Zealand price was up around $1.36.
00;03;34;14 – 00;04;01;20
There’s quite a price discrepancy there. We thought that maybe the value buyers out there would start to say, why do I need to buy 136 when I can possibly buy 120 out of the EU, or right around that price out of the US? I think that’s exactly what happened. We saw the New Zealand price start to come off on this auction went down to about 131, while we saw the EU price move up to between 123 and 125, depending on which month you’re looking at.
00;04;01;20 – 00;04;27;17
The US price is now at one 22.5, up significantly from where it was just a few weeks ago. And yet it is now once again the lowest price in the world, even though we are well off our bottom there, I would say. Just pointing out, though, that the SMP price on today’s auction was pretty much in line with where the New Zealand futures were, indicating we might trade at when we moved the whole milk powder.
00;04;27;17 – 00;04;48;02
I think this is the one that is interesting to me. We were down 1%, if you remember, on the last auction, we made some very significant gains on that auction. And this, you know, we would have thought that prices were going to come crashing back down, or some people thought that certainly the people trading up powder futures thought that that was going to happen.
00;04;48;02 – 00;05;16;04
Most of the powder futures were trading. If we exclude July, most of them were trading below 4000. July was at 4145. August was at 3975. When we look at the results on this auction, we came in quite a bit stronger than that. On almost all months. We would say that most of these came in. Let’s take August, for example, coming in at 4445, while the August futures were trading 3975.
00;05;16;05 – 00;05;37;06
That’s almost a 10% difference between where the auction landed and where futures were predicting we were going to be at. I would say that September looks very similar. So yes, the GDP auction result was lower for home up powder. But I would say that two things. One, it held most of the gains that it put up on the last auction.
00;05;37;06 – 00;05;45;06
And number two, I would say that it very much came in higher and expectations on versus the futures results.
00;05;45;08 – 00;06;02;21
John, if we move to the volume by region real quick, I guess a couple of things that stand out is this is going to be an event change. So that year over year, but from last two weeks ago to this week, Africa up 240% south and Central America up 278%. But they had the lowest winning bids at five and eight respectively.
00;06;02;21 – 00;06;17;25
If we moved to North Asia, they were actually up 24%. Event change and they had 48 winning bids. So a majority of it coming out of that North Asia region on this global dairy trade, which was kind of interesting, just being up 24% right there.
00;06;17;25 – 00;06;41;18
You know what, the activity coming out of different regions has been very interesting and very difficult to read over the last few months. I would say that for the most part, China’s behavior hasn’t been out of pattern for most of the last few months when volumes are at their highest or offers are at their highest on the GDP, China tends to come in and buy the most, and they have.
00;06;41;18 – 00;07;00;16
I think part of that is looking to have the least effect on prices. When volumes start to decrease, China decreases. Thereby, over the course of the last few auctions, prices have gone higher. And when you looked at it, you know, before we can look in at the data, you would say, geez, China must be here. And then when you go to look at the data, China hasn’t been there.
00;07;00;16 – 00;07;19;25
It’s been mainly led by the Middle East and Southeast Asia. I thought that that’s what we were seeing today, when in fact, when we got the data, we were able to see that Southeast Asia, as you pointed out, they kind of backed off a little bit, right? They didn’t disappear. They just weren’t you know, they’re down 50% on the last auction and down 53% on a year over year basis.
00;07;19;25 – 00;07;37;12
But China was up 24% on an event over event basis and only down 14 on a year over year. So they started to pick it up. And then you had some people like Africa, as you pointed out there. And I would say people like South and Central America, they started stepping up, but stepping it up on a very small base.
00;07;37;12 – 00;07;58;06
Right. But I would point out that this is going to be historically one of the smaller volume offerings of the season. And as we get a few more auctions down the road here, we’ll start to see those offers start to increase again. Yes, that means there’s more product for sale, but that’s typically when we would see China start to step out and start buying more.
00;07;58;06 – 00;08;17;28
And I would just looking at this auction, you could say, oh, it feels like China did step out just a little bit early here. And maybe it’s because prices did move higher. And then it really begs the question, what do prices look like when we get a little bit further down the road? And if we have Southeast Asia continuing to buy and we see China step in at the same time, I’m not sure.
00;08;17;28 – 00;08;24;26
But the geographic breakdown on this one was a little bit different than what we’ve seen over the course of the last few months.
00;08;25;01 – 00;08;33;08
Absolutely. Well, John, for this GT specifically, is there anything that sticks out to you in your mind that we haven’t gone over so far? Or we do kind of hit everything on the head right.
00;08;33;08 – 00;08;57;05
There, nothing too different. Again, I mentioned earlier we saw some pretty big moves on that last GT. We hadn’t seen prices as an index be that high and quite a while. Right. And then we had three successive increases in price really for there was a minor increase on the fourth auction back. Well, it was easy to say, geez, I think these prices are a little we’ve gone too far, right.
00;08;57;05 – 00;09;18;05
And that we’re going to see a big rejection. The market was certainly calling for a big rejection, but I would have to say I don’t think we got a big rejection here. Yeah, we did move lower, but I don’t think that the market said these prices are out of line. Again, whole milk powder only being down 1% after the move it made on the last auction makes you stand back and say,
00;09;18;07 – 00;09;35;00
Like that’s not a big rejection. And what happens when China really starts to come back in then? Maybe they already have, but I just tend to look at it, say, yes, it was lower, but it was a supportive auction. And I would say it’s definitely an auction that beat expectations, at least as compared to where the futures were trading.
00;09;35;00 – 00;09;38;11
Not as wildly bearish as as some folks were thinking them.
00;09;38;11 – 00;09;39;02
That’s correct.
00;09;39;02 – 00;09;55;16
Well, John, as always, we appreciate your deep dive in the global dairy trade. John and I will be back with everyone in two weeks, the beginning of June for the next auction. If anyone has any questions, comments, concerns, please feel free to email John or myself. But until then, have a great week and even better weekend. We’ll see you next time.
[/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.
