Guest host Brian Fletcher 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.

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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;19 – 00;00;23;05

Hello everyone and welcome back to another Get Tuesday. I am your host today. This is Bryan Fletcher filling in for Cody with me as always from Chicago is Mr. John Spain. How’re John, how are you doing today?

00;00;23;05 – 00;00;25;13

You doing well, Brian. And happy to be here. Awesome.

00;00;25;13 – 00;00;30;21

Are you a little sad? The today is the last GDP event of 2024.

00;00;30;27 – 00;00;43;28

I shed a little tear over that fact, but as you stated, this is the last event of the year. Our next one will be on January 7th, so we have a three week break between now and the next auction.

00;00;43;28 – 00;00;55;16

So not only the last one of this year, but one of the longer stretches in between. It’s going to be tough. Well, today we had a lower aggregate result. What were your key highlights with today’s auction?

00;00;55;16 – 00;01;24;21

Yeah. So if we look at the average calculation on the weighted average price, we’d say that today’s auction and total was down about 1.1% versus the last auction. Let’s start with the products that did the best cheddar cheese came in at 0.1% lower, and that’s going to put the New Zealand cheddar price at about 212. If we moved to mozzarella, that was down 2.1% at 183.

00;01;24;21 – 00;02;02;21

So well prices down slightly, but butter as well was down 0.7% on an 82% fat. Adjusted New Zealand butter is going to come in around 301. AMF, however, was the biggest loser of the day. It came in 4.2% lower at about 330 a pound, up 2%. Fat adjusted basis. When we look at some of the more actively traded products on the exchange and most heavily weighted, let’s go to a whole milk powder that was down 2.4%, came in about 176 for 3890 on a dollars per metric ton.

00;02;02;21 – 00;02;24;26

If we look at where whole milk powder futures were trading prior to this, they were actually trading a little bit lower than that. So here in the last couple days or so, powder futures have really taken a nosedive. And we’re projecting not only was the auction for home on powder going to go lower, but they projected they were going to go lower than we actually went.

00;02;24;27 – 00;02;47;28

As we go over to skim milk powder, this is where things become interesting. We came in 3.2% lower at an average price of about 125. If we look at that came in at $2,757 per metric ton. The futures for skim milk powder were actually quite a bit higher than that. So they were off their highs. And you know, where have been moving lower in the last couple days.

00;02;47;28 – 00;03;06;18

But when you look at where we actually settled, even though we settled 3.2% lower, appears to be a lot lower than where the S&P futures were projecting. We were going to come in at. And if we just look at it where some of this comes in, we haven’t been this low on the futures since the beginning of October.

00;03;06;21 – 00;03;28;17

And when we go to look at history, price action on the GDP, we would say that we haven’t seen some of these prices on skim this low since mid of October as well. So quite a change there in the skim milk powder price, specifically when we compare it to expectations of the futures price.

00;03;28;23 – 00;03;43;14

If we can focus on some relative values within the result, specifically starting with skim milk powder, did you notice any geographic differences based upon the origin of the product that came in via skim milk powder today?

00;03;43;14 – 00;04;03;07

I don’t know. In terms of origins of the product, I don’t think we saw anything come out of North America, and that shouldn’t be out of expectations simply because we’re so much higher. I mean, I see European prices up there when we go to individual sellers. It doesn’t seem that anybody sticks out to the best of my knowledge.

00;04;03;07 – 00;04;23;03

And most of those European prices look in line. I think the European prices, like from Arla, the Arla prices that were on there, those kind of suggest that the European price was quite a bit lower than the New Zealand price. And we’ve kind of seen that over the course of the last few weeks in here, Brian, we’ve seen European prices drifting lower.

00;04;23;03 – 00;04;40;09

We’ve seen it on the European futures. And that’s also resulted in New Zealand prices moving lower as well. But I would say European prices on the auction look like they were about 119. And if we compare that again to the GTI, we’d say about 125 for New Zealand prices.

00;04;40;11 – 00;04;53;21

All right. So it’s kind of carrying the general if we’re looking forward curves around the globe, that’s in line with where we’re seeing European pricing US and New Zealand. So kind of withholding that current trend.

00;04;53;24 – 00;05;04;07

Yes, we would say Europe is the cheapest then New Zealand. And then finally the US price has generally been higher than the rest of the world on a spot Am futures basis.

00;05;04;12 – 00;05;12;25

Within the breakdown of who was buying off of GDP today, was there any big change versus recent trends at all?

00;05;12;27 – 00;05;37;17

Yeah, I would say China. We look at I just pulled out the last auction. China represented 51% of the GDP share a volume by region on the last auction. When we come to two days, they only represented 38%. So we did see China step back. And they had been so aggressive. And it really had taken on a lot, at least on the GDP side on this auction.

00;05;37;19 – 00;05;59;25

They were still very much there, just quite a bit less than the last auction. When we look at Southeast Asia, right on the last one, they were 24% of the volume, and on this one they were 33. So China, step back there, the 800 pound gorilla in the room. That is more than likely what allowed the a bit of a release valve on prices and let prices move lower.

00;05;59;25 – 00;06;26;21

But yeah, we did see Southeast Asia step in and take up some product. I would note as well that this auction had 4% less volume on it than the prior auction, and the prior auction had 7% less volume. So we’re through the high season of offers, if you will, on the GDP in terms of volume. So we should be expecting to see less and less volume on each progressive auction as we go down the line.

00;06;26;21 – 00;06;52;09

So we want to keep that in mind that we’re probably going to be seeing less volume, and that’s going to really magnify the effect of if China comes in here and is relatively aggressive, there’s less volume for them to suck up. And that can really push prices higher at the same point in time, if they remain kind of on the back burner, which it looks like they were here, that can really allow prices to move lower as we go into this lower volume season.

00;06;52;16 – 00;07;16;18

Thank you. Can we shift focus to mozzarella cheese for a moment. But just looking at it really quickly, you mentioned it was down about 2%. Puts it in the and EU origin product each right around that 182 to 183 area. And then just looking at US markets we’ve moved the complete opposite direction. And now in basically every instance are now higher.

00;07;16;18 – 00;07;25;18

So just curious what you’re observing in the cheese space specifically mozzarella and what this can mean in terms of U.S. export competitiveness.

00;07;25;23 – 00;07;46;18

Oh I know it’s great that you brought that up, Brian. We’ve talked about it so many times before, not only on this podcast, but in our general day to day conversation. And, you know, we export a lot of cheese. We need to continue to export a lot of cheese. And generally the format that we export is mozzarella. Our main competitors are going to be New Zealand and they’re going to be Europe.

00;07;46;18 – 00;08;07;04

And you would say that, you know, Europe has been so much higher than the rest of the world, specifically the US for so long, that we should be getting some exports. It’s very possible that we did get some exports before this happened. But as you pointed out, we’ve seen a ramp up in U.S prices. Black cheese now at 186.

00;08;07;04 – 00;08;30;17

If we look at the futures, futures out there for Feb and March are at 185. Right. And as you pointed out here, this mozzarella prices. What do we translate. This price at 185. So here we are with the US spot price about the same as the rest of the world. Again, I can’t necessarily speak for what product was exported or contracted for this rally.

00;08;30;17 – 00;08;48;01

One might be able to say that we got some exports off at the expense of Europe and New Zealand, and that’s why we rallied in New Zealand and Europe came down. That’s a possibility. I guess we always have to keep the door open. We just don’t know what was contracted. But my sense of things was it’s not enormous.

00;08;48;01 – 00;09;12;18

And when we look at the amount of cheese capacity that we have coming online here in the US, as well as the milk production, I feel at least that we’re going to have a lot of cheese, and one of those plants is going to be a large scale mozzarella plant. I guess knowing that our US price is now higher or at par with the rest of the world has me concerned about the ongoing viability of exports.

00;09;12;23 – 00;09;35;29

All right. Yeah, it’s been a pretty quiet, about a month long stretch of some pretty severe convergence between the US moving up, Europe moving down. A GDP price is coming down as well. So it’ll be interesting to see how that plays out going into the new year. Within that. John, do you have any other closing thoughts or expectations as we move ahead into the New year in regards to GDP?

00;09;36;04 – 00;09;59;01

Oh, it’s just been an interesting year, and I would just say we came into the year with China largely absent. We got into the middle of the year with China coming back, and here we are with them stepping off and it feels like prices are moving lower. Yes. I just look at it to say China is still an important player on the world stage and they at times can really set the tone for international dairy prices.

00;09;59;01 – 00;10;18;06

At the same point in time, I feel as if 2024 was characterized by a year of less milk in general and not more. And at least here in the US, as we march into 2025, it feels like we might be up against more milk here in the US. And it’s yet to be determined in Europe what that’s going to look like.

00;10;18;06 – 00;10;27;25

But I have to imagine somewhere along the line we’re going to see more milk out of Europe as well. And so I’m curious to see what 2025 looks like in that environment.

00;10;27;28 – 00;10;51;17

Well, thank you as always, John, for all of your insights and analysis here. And that will do it for another GDP podcast. Cody, we’ll be ready to get you back in action into 2025. And we all want to thank our listeners for tuning in. So thank you very much. We hope you have a wonderful holiday season and a wonderful start to 2025, and we’ll see you again in a few weeks.

00;10;51;18 – 00;10;55;07

After a three week hiatus of GDT. Thank you very much.

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