Cody Koster and Jon Spainhour take a deep dive into this week’s GDT report.

Questions or comments? Contact Jon at [email protected], Cody at [email protected], or give us a call at (312) 492-4200.

(Transcript auto-generated)

00;00;00;10 – 00;00;08;23

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;26 – 00;00;16;18

Hello everybody. Welcome to another Get Tuesday. I’m your host, Cody Costa with me from Chicago, Mr. John Spain. How are John. How are you today?

00;00;16;18 – 00;00;18;12

Doing well, Cody, thanks for having me here.

00;00;18;12 – 00;00;25;05

Absolutely. Well, we’re glad to have you on this higher or more exciting GDC than we’ve seen in a long time today.

00;00;25;05 – 00;00;48;05

Yeah. You bet. You know, the GDP came in higher today on the index. It came in 6.5% higher on a total overall index, which is, you know, another good move when we get down into the details. Skim milk powder came in 3.8% higher around $1.20. This was good. And this will probably be the only one that, you know.

00;00;48;05 – 00;01;06;25

If we’re trying to throw some shade on this auction, we’d say it was good. It just didn’t come in quite as high as maybe the skim milk powder futures were suggesting. When it comes to whole milk powder, whole milk powder was the big winner today, up 6.8%. And that came in almost exactly on where the whole milk powder futures were trading.

00;01;06;26 – 00;01;31;28

They’ve been on a tear here over the last week or so, really predicting that this auction was going to move higher. It did move higher for home up powder. And like I said, almost exactly where the futures were trading before the auction. On the fat side, AMF up 4.8%. And then going to butter that was up 3.3%. If we translate the butter to an 82% butterfat basis, that’s about 304A pound.

00;01;31;28 – 00;02;00;29

And so that one we can look at it and say that was higher. It is still below the US. The US came in the day at three 1850. And this butter market here, if we were to translate it to an 80%, would have come in around $3 today. So New Zealand coming up in their butter price, but still substantially below the U.S. and where both the US and New Zealand are well below the European price, which in some cases is as high as $3.70.

00;02;00;29 – 00;02;21;01

Finally, when it comes to the cheese side, we always have to take it with a grain of salt. When we’re comparing these cheese prices. But the cheddar price today came in exactly unchanged at $1.94. The mozzarella price, though, was up 5% at 218. Let’s keep in mind that is a European mozzarella price. And in both cases with both cheddar and mozzarella.

00;02;21;01 – 00;02;40;11

It is an extremely small amount of product that changes hands there. And it’s good to know what’s happening there. It gives us some directionality in terms of are they apples to apples with U.S prices? The answer is kind of. There are some tariffs and quotas that can really make those prices different when it comes to different destinations.

00;02;40;11 – 00;02;54;24

So overall though, a good auction in terms of pricing again up 6.5%. And I would just point out that whole milk powder between this auction and the last auction is now up almost 11% from its low set a few weeks ago.

00;02;55;00 – 00;03;01;29

Well, it seems that whole milk powder was really leading the way for our nonfat today and spot to reach some new highs that we haven’t seen in quite a while.

00;03;01;29 – 00;03;26;02

Also, yes, I’d say it was. Hormone powder allows for skim milk powder to go up on the GT with the skim milk powder going up to $1.20. That allowed for the US price. I think, you know, we had already been trading a premium to the world. We are still trading at a premium to the world now at a dollar 28.25, but that skim milk powder price coming up to $1.20 cleared the way for the US price to move up a little bit out here.

00;03;26;02 – 00;03;38;21

And now our futures are all trading, you know, higher on the day out here. And I would say our nonfat dry milk powder price today moved to its highest level since January of 2023.

00;03;38;24 – 00;03;59;04

So yeah, that’s quite the difference that a few different options can make, especially for the whole milk powder in itself. And I guess the big thing that we noticed, or that you had talked about before we got on Jan, was the purchases by region. We don’t want to get anybody too excited, but it seems that North Asia was definitely back in the buying seat, at least for this auction.

00;03;59;04 – 00;04;02;21

And if people remember two weeks ago for that GDT also.

00;04;02;22 – 00;04;19;24

You bet it’s just predicting Chinese behavior has always been pretty darn tricky. I think on that last auction, we saw the Chinese show up with a little bit of buying power, and I think that people looked at it and say, well, I don’t want to look too far into it because that’s just one auction, and one auction doesn’t make a trend.

00;04;19;24 – 00;04;38;20

But then we get into this auction and we see they really came out of the woodwork to specifically China, Southeast Asia, who had been a good buyer in Chinese buyers absence. They step back on this auction. But China really ripped into it here. And you know, did some of their highest volumes that we’ve seen in a very long time in terms of where does that take us?

00;04;38;20 – 00;04;54;00

It’s hard to know. You know, you tend to look at it and say, well, you know, there may be some reasons why China should be here. And if they are going to continue, that paints a pretty bullish picture out here. We’ve talked about it for a while. We’ve had a constrained supply side on the international market or on the world market.

00;04;54;00 – 00;05;10;12

And at the same point in time, we’ve had a lack of days of cold demand, right. And that is something that really allowed prices to languish here for the last year or so. And now our supply side really hasn’t responded and in some cases has gotten worse. And then you’ve got the potential for Chinese demand to be back here.

00;05;10;12 – 00;05;37;19

It’s hard to ignore that, right at the same point in time, if we got into our auction two weeks from now, Kody and the Chinese participation went back to a, you know, back to where it’s been. I don’t think anybody can be surprised by that. There’s really not very many signs that point towards a China should be back here, or even people out in the international market saying, you know, the Chinese have really been buying off of the GDP and have been demonstrating that they’re really hungry for product.

00;05;37;19 – 00;05;50;04

However, that means that they were here. They were here two auctions in a row. The whole milk powder prices jumped up 11%. And it’s just proof positive, just how important their purchasing is when it comes to international dairy pricing.

00;05;50;09 – 00;05;56;00

To your point, two auctions in a row is friendly, but it’s definitely not a trend by any means for their buying coming back.

00;05;56;00 – 00;06;16;24

Boy, I tell you, you know, right before I got on this call. But after this auction, we got the July Chinese imports, right. And year to date, their whole milk powder is down 8.5%. Their S&P is down 36%, cheese is down one. We really wanted to say something very positive there. Butter is up 9.9. Still coming off of a small base right.

00;06;16;24 – 00;06;40;24

But there’s just nothing in the data. You know coming into this that suggests hey look their behavior is changing. Now this was the July imports. Here we are coming into the end of August. Right? I understand where someone could say, well, you know, times have changed since this data was created and always just published today. And there’s also an argument to say, well, if they haven’t been buying for the last year and a half and they need to buy something, they probably have a lot to buy.

00;06;40;24 – 00;07;03;01

I think all of those arguments are on the table and have to be observed and watched. And I don’t know, it’s just something that, sitting in the seat and watching the GDP and watching Chinese behavior for as long as they have, I can tell you it’s just such a hard thing to predict and even harder to counter if they don’t show up next auction or start to show a little bit less, there is a possibility that prices start to sink again here.

00;07;03;01 – 00;07;18;02

Not saying that that’s going to happen, just saying that certainly can. And then on the flip side of that, they continue to stay in the game here and continue to be buyers. Well, then there’s a pretty good argument to say that prices need to go up across all dairy products specifically on New Zealand. Right?

00;07;18;04 – 00;07;32;10

Absolutely. Well, all right, everyone that is going to do it for myself and John Spain, how are on this Tuesday we will see everyone in two weeks to timber third for the next auction. Until then, have a great week and even better weekend. We’ll see you next time.

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