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;13 – 00;00;16;26
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00;00;16;28 – 00;00;25;11
Hello everybody. Welcome back to another GDC Tuesday. I am your host, Cody Koster, and with me from Chicago, Mr. John Spain. Howard. John, how are you today?
00;00;25;11 – 00;00;27;08
Doing great. Cody, how are you doing today?
00;00;27;10 – 00;00;52;13
I am doing well. We’re happy to have you here, going through this global dairy trade that we had on the 17th of June today, GDP post a 1% lower aggregates auction and every agg. We have a positive 1.3 change in events from last time, which is going to be June 3rd. So a lot of interesting things happening in this GDP.
00;00;52;16 – 00;00;53;18
Where would you like to start them?
00;00;53;18 – 00;01;16;26
You know what, I would just start out with the idea that this was a lower auction on most products. And at the same point in time, I would say that a lot of these products ended up coming in higher than expectations. Let’s start out with skim milk powder. It came in 1.1% lower for New Zealand medium heat skim powder at about 126.
00;01;16;29 – 00;01;37;18
You know, that came in slightly higher than expectations. I’d say that one’s just right in line there. However, when we moved to whole milk powder, I think that’s where the biggest surprise comes home. Milk powder futures were looking for, you know, in some cases a seven, 8 or 9% decline. I want to be clear, this came in 2.1% lower.
00;01;37;21 – 00;02;02;16
Lower is lower. And there’s no reason to parse words on that. However, I do think it’s important to point out that this came in well over expectations and that came in at 4084. And if we go back and look at where the GDP pulse, which traded last week and gives us a little bit of a look into where the big auction might trade, it was coming in at 4030.
00;02;02;16 – 00;02;27;22
So we came in over where the GDP pulse was trading. And at the same point in time we came in well over where the futures are trading. So futures have continue to predict a decline in whole milk powder. We have gradually declined. But they seem to be way out over their skis in terms of what they are predicting as we move into the fats will point out that butter was up 1%.
00;02;27;25 – 00;02;50;09
That’s going to come in around $3.58 on an 82% butterfat basis. And as we go to AMF, that was down 1.3, coming in about 330 a pound there on a butterfat basis. So I do want to point out that a little bit of flatness there, if you look just look at the butter fat market, one was up a percent, the other one was down 1.3.
00;02;50;09 – 00;03;11;13
But it’s worth noting that those are still both well above where the US is trading right now. And we would also point out that the EU market is trading right around those levels that New Zealand finally move into cheese here, mozzarella down 1.9% to $2.18. A little bit of give and take them there over the last few weeks.
00;03;11;13 – 00;03;36;20
Up one week down the next year. But cheddar cheese that one was kind of a big winner on today’s auction. Cheddar cheese up 4.9%, coming in at $2.26 on the day. Again, as we always try to stress here, we believe that mozzarella is probably the better comparison on the international price stage compared to the US. But when you do see cheddar moving up, it’s hard to ignore that.
00;03;36;24 – 00;03;58;29
So up 4.9% there. And again mozzarella down 1.9 to 2.18. When we look across to Europe and speak to some of our friends there in Europe and look at some of the pricing indexes that we’re aware of there, we would say that the European price is probably a little higher than this right now, between 223 and 225 on the cheese side.
00;03;59;02 – 00;04;15;03
And I think it was interesting, John, just to kind of give people a little backstory of the way that the GTI trades in rounds and you watch it every morning. You had made mention to the company that cheddar cheese was actually the product that was keeping things open into round 12, 13, 14 this morning. So yeah.
00;04;15;03 – 00;04;41;26
It was really weird. It was a relatively long auction today, and what kept one of the components that kept it open was chatter. Chatter just kind of kept going and dragging a little bit higher and a little bit higher. And it actually outpaced the skim and whole milk powder contracts. That’s something that we very, very rarely see. But chatter did have a bit in it today, and it was one of the contracts that kept us going for as many sessions as we did today.
00;04;41;27 – 00;04;55;05
Just as a comparison, last auction on June 3rd, there were 15 rounds before we closed off. On this auction, we went for 20 rounds and almost an additional 40 minutes of time to complete this auction.
00;04;55;07 – 00;05;04;10
Yeah, I found that very interesting. Usually it’s the butter or the whole milk that kind of keep us going into the later rounds, but this time cheddar cheese was taking center stage for sure.
00;05;04;11 – 00;05;24;16
Yeah, you know what? Sometimes it’s a matter of inside baseball or technicality. But you know, how quickly or rapidly does the auctioneer raise? The blind, if you will, in on whole milk and skim. They tend to raise the blind a little bit faster than on the butter and cheese side. Normally they don’t have to on cheese. This one is like they just kept going a percent at a time.
00;05;24;16 – 00;05;31;06
It really wasn’t rationing in off demand in a quick way. And as a result, here we we end up with 20 rounds.
00;05;31;06 – 00;05;56;06
Awesome. Well, moving to the volume by region real quick, just kind of looking through that. There was 110 winning bidders today. North Asia was 38 of those. That is up 19% on a year over year change. They’re down 20% from the event change North Asia. The other one that kind of stuck out to me was the Middle East, up 25% the year over year and even change, actually.
00;05;56;12 – 00;06;14;00
Yeah, I guess I would say if I had to look in at this and say, what is the defining element of the bidders are a good characteristic. I would say Asia was up, you know, that’s North Asia. That was up 20%, as you pointed out, a little off of the last auction was still up 20% year over year.
00;06;14;01 – 00;06;39;17
That that’s healthy. Southeast Asia, though, down 59% year over year and down 6% on an event change. Right. So Southeast Asia, North Asia, you know, kind of paring back and forth here. But something that does stand out to me and it’s not a huge volume, but it’s it’s really worth pointing out is the Middle East. The Middle East was up 25% on a year over year change, up 25% on an event change.
00;06;39;17 – 00;06;58;18
Try to say, what are they doing there? You know, what would have caused them to be so aggressive here? And again, it’s off of a relatively low number. But I think in some cases New Zealand is going to be a bit of a bargain as it compares to the EU. And I think that’s something that we have to keep an eye on.
00;06;58;18 – 00;07;21;06
At the same point in time. I would say that the US does still present a bit of a bargain, if you will, as compared to New Zealand and Europe. Right. So New Zealand right now, as we pointed out, let’s call it 225. On the chatter side right now the US is at 175 on the block side. That’s $0.50.
00;07;21;06 – 00;07;43;21
That represents a value to buyers. That’s a little bit wider than the band that we normally see. We typically run into export traffic between 30 and $0.35. Here we are at 50. That’s probably going to attract some attention here. On the butter side again you’ve got three 6370 butter in Europe and then New Zealand. And and here the US is is still south of 260.
00;07;43;21 – 00;08;08;01
So that does represent relative value at the same point in time. I do want to point out that the US nonfat market was at $1.40 for a significant amount of time, while the rest of the world was at $1.20. We lost exports. Prices come down, we get down into the one fifteens. The rest of the world went up into the one 20s, and in some cases New Zealand went up into the one 30s.
00;08;08;01 – 00;08;28;20
So we get to a 130 up in there. The US finds export business and we go higher in price. Then we made it coming into this auction we were at $1.27 and New Zealand just went to $1.26. I would say that just puts the US. This is the highest price point in the world again. And as a result, prices came down ever so slightly today.
00;08;28;20 – 00;08;53;12
So one 2651 2650 is not that much higher than the rest of the world, but typically we need to be a little bit below the rest of the world if we’re going to catch exports. That does not mean that the US price needs to go lower immediately. I think we proved it to us this past winter when we saw the the US at $1.40, while the rest of the world was significantly higher for a long time, so we can stay up at that higher price point.
00;08;53;12 – 00;09;05;05
But I would say it’ll be hard for nonfat to fight gravity here. The very least, it’s going to make it very difficult for nonfat to go higher at the moment. And we probably will see nonfat drift a little bit lower.
00;09;05;06 – 00;09;20;19
Yeah. Everyone’s eyes are usually on the GDP every other Tuesday to kind of see what’s going to happen overseas and how our markets are going to react at the same time. And with that, our next GDP is actually going to be the 1st of July. So in two weeks is the next time that John and I are going to be back with everyone.
00;09;20;19 – 00;09;38;29
Till then, we appreciate everyone tuning in. Listening to GDP Tuesday. John, we appreciate you with all your insight on the global dairy trade. If anyone has any questions, comments, concerns, please feel free to get Ahold of us. We will try to answer those to the best of our abilities. But until July gets here, everyone have a great rest of the couple weeks of June.
00;09;38;29 – 00;09;41;21
Enjoy the beautiful sunshine and we’ll see you in July.
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