Host 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.

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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;27 – 00;00;17;06

Hello everybody. Welcome back to another GDC Tuesday. I am your host, Cody Koster, with me from Chicago, Mr. John Spain, our John, how are you doing in this new year?

00;00;17;06 – 00;00;24;27

I am doing well. Cody and I am so happy to be here once again. And happy New Year to you and to all of our listeners. We are happy to.

00;00;24;27 – 00;00;26;08

Have you back for the.

00;00;26;08 – 00;00;28;07

First GDP.

00;00;28;09 – 00;00;32;29

Of 2025. A little bit of a lower GDP coming in that negative two.

00;00;32;29 – 00;01;01;00

Point 9% as a whole for this round. You’re exactly right. Prices were lower here, 2.9% on the aggregate. You know some of the standout players here. Let’s start with the fat side. We’ll say that butter came in 2.8% higher coming in right around 3:09 a.m. came in 1.3% lower. How about 325 when we try to look at it through the fat lens, I would just say that those are one offset the other.

00;01;01;00 – 00;01;22;19

There. Right when we get to the cheese side though, cheddar was up 1%. And that’s going to come in about $2.14 on the cheddar side. Mozzarella though was up 3.4%. And kind of the star of the show here, however, only up to $1.89 as we move into the powder side. Here’s where a little bit more of a let down here.

00;01;22;19 – 00;01;46;11

Whole milk powder came in 2.2% lower. I would just say that yes, that was lower. But I also want to point out that came in higher than the last GDS pulse was suggesting we were going to come in at. And it also came in a little bit higher than where whole milk powder futures were pricing net. Since the last auction, which was three weeks ago, we’ve seen whole milk and skim milk powder futures really get decimated here.

00;01;46;11 – 00;02;09;13

So I think everyone was expecting that it was going to be lower. I would just say the whole milk powder overperformed a little bit when it comes to skim milk powder. Skim milk powder was down 2.7%. When we bring everything together here, I would just say that the GDC pulse was looking for down about 2.4% and some of the futures were actually looking for a little bit better price than that.

00;02;09;13 – 00;02;31;10

So I would say skim down 2.7%. And I would say that that fared a little bit worse than both the futures and the GDS pulse were suggesting out here. Overall, though, I guess it was kind of a doom and gloom feeling coming into this one from a lot of people. And I guess I would just say I don’t feel like the net result was doom and gloom.

00;02;31;10 – 00;02;49;23

I felt like, yes, we were lower, but it was kind of a better result than what I’m might have expected. Just hearing the rhetoric out there. I would also just want to point out that the skim milk powder futures and the settlement here for this auction, this is going to be the lowest result that we’ve seen since the middle of August.

00;02;49;23 – 00;03;06;10

So prices have kind of stepped back here on the skim milk powder. And when we get to whole milk powder, you know, we’re off our highs. But not by much. So a small decrease here in the last two auctions. And again, this whole milk powder result was better than what most people had anticipated.

00;03;06;13 – 00;03;16;17

I think one of the standouts on the higher side was butter, coming in at 2.8% higher on this auction, like a price of 309 for the average.

00;03;16;21 – 00;03;38;24

Yeah, it did okay, right. We have to acknowledge that that it did do okay for 309 up 2.8%. However, I just don’t know that it’s anything that’s like really changes the rhetoric when it comes to the fat market. I would just say that it is kind of in line with where the world fat market was. So but it is higher in the US and at the same point in time, lower than the EU price.

00;03;38;24 – 00;03;41;17

So New Zealand butter sitting right there in the middle.

00;03;41;22 – 00;03;52;17

And I know looking back John we’re talking about cheese I know cheese. Mozzarella came in 3.4% higher here in cheddar was 1% higher. But wasn’t it expecting a little bit lower of a trend on cheese for the average?

00;03;52;17 – 00;04;14;15

I would just say that the US price now right on mozzarella. At least we’re at one 9150 in blocks, right? That’s going to put us higher than the mozzarella price on the GTI and generally higher than the EU price of mozzarella. It looks to me, though that cheddar at 214, as we’re seeing here on the auction, is probably one of the higher cheese prices in the world.

00;04;14;16 – 00;04;30;28

Again, though, we have to be so careful or we’ve been kind of schooled to be so careful about the way that we compare these cheese prices specifically when it comes to cheddar. Nevertheless, cheese was higher, and higher is higher. The New Zealand cheddar price is the highest in the world right now, so something to be aware of.

00;04;31;02 – 00;04;33;23

Something to keep our eye on for sure. I’m moving.

00;04;33;23 – 00;04;35;09

To the.

00;04;35;09 – 00;04;52;01

Regions for buying. I mean, nothing stuck out as like a blinder in the face I guess on who was buying or who wasn’t. I mean, the Middle East was up 41% from last event three weeks ago, and North Asia was down 21%. But other than that, something that stuck out to you yourself majorly there.

00;04;52;02 – 00;05;13;04

You know, I think we’re just in terms of participation, as you pointed out, North Asia and or China down 21% on the event change from event to event, but again up 9% year over year. So I think the Chinese really step back on this auction versus what they have been doing here over the last three months, but they’re still, you know, 9% higher than the year before.

00;05;13;04 – 00;05;36;25

So pretty decent clip. It’s important to remember that we’re past the high tide, if you will, of New Zealand offers. And from here on out we likely see less volume than more. Right. So on this auction, there was 6% less volume than on the auction before. And that’s been moving progressively lower here. So here we are in a time when the offers are lighter and prices are going down, kind of convert to what we might think is going to happen.

00;05;36;25 – 00;05;57;01

But I guess I would just generally say it feels like buyers got what they needed and are stepping down their demands as the supply goes down. Or set another way, they time their demand to come in and pick up the most volume when the most volume was available and prices did go higher. But now, as volumes are going down, they’re stepping off a little bit here.

00;05;57;02 – 00;06;16;10

I think that kind of stands out to me. The Middle East, you know, as you pointed out, up 41%. There are a third biggest buyer on there. They were up 41% event to event, but down 13% year over year. So again they kind of come in and out of there. I just don’t know that there’s anything I can get that excited about as it comes to these volumes.

00;06;16;10 – 00;06;33;22

I think what we are seeing, though, is no China. It’s still just this wild card of, hey, are they here? Like in the way that we’ve seen them in the past? And if they’re going to, to buy, you know, a little bit more than they normally do on a year over year basis, then that’s supportive right to the marketplace.

00;06;33;22 – 00;06;58;01

But it just feels like it’s still one of those deals where it’s like, boy, they could continue to step away at any time. And you can see as they step down their volumes, prices come lower. So it’s still just a little bit iffy in my mind. I think Steve and the Fresh Agenda team have done such a nice job of watching China and explaining, hey, it feels like China is here, but it feels like maybe they shift some of their demand out of Europe, right?

00;06;58;01 – 00;07;17;18

And out of the US, and they’ve put it on New Zealand. So yes, they’re buying more on the GT from what we can tell from, you know, the imports that they haven’t really bought in more in the world so much as there’s a little bit of a channel switching, meaning instead of buying out Europe, they’re just buying a little bit more out of New Zealand and specifically buying it on the GTI.

00;07;17;22 – 00;07;20;19

So just a little bit of changing hands where the buying is coming from.

00;07;20;19 – 00;07;42;18

Essentially it feels like that. And at the same point in time, let’s just not ignore. They bought a lot, right. And prices went up correspondingly. One of the other things I would just point out here, as it relates to nonfat and skim, is probably our most relatable product out here. And that is that on the GDP, right. We showed there that the New Zealand price did okay, right.

00;07;42;18 – 00;08;02;14

Coming in at about a one 2121 area, maybe as high as 122. However, when we dig a little bit deeper into the auction results, we can see that there was some skim milk powder that came out of Europe that was put up here on the auction, and it comes out trading at about $1.15 a pound. Now, I don’t want to make too much out of that.

00;08;02;14 – 00;08;26;04

I don’t know that the GT is the most developed market and related to these other products, but I would just say it’s important to point out this is a $1.14 to a $1.15 trade. It was some U.S product that went up there and actually did trade on the auction today, and it came in at $1.17. The reason I bring this up is we also got our export report today for November.

00;08;26;04 – 00;08;45;29

And what we can see on there is in November, we had our second lowest nonfat export run and the last three years at least. Now there are a lot of reasons for that. We had bird flu in California. We saw the dairy products report we made less nonfat, right. That was less nonfat or skim to export. At the same point in time, we saw our inventories go up right.

00;08;45;29 – 00;09;05;19

And you say, well, why is that? And I think it’s very much we lost exports, right? We were priced out of the export market. And I think that we can see it now in the export side of things. You can make the argument that says, well, that’s fine because we didn’t really have anything to export. However, if California behaves like every other state has, milk production is likely to come back.

00;09;05;19 – 00;09;22;03

And as it comes back, there’s going to be more nonfat that has to be manufactured, and then that nonfat is going to have to more than likely be exported. I just want to bring that up from the standpoint that currently the export market stands between 114 and 122.

00;09;22;06 – 00;09;29;18

Yeah. Like you mentioned that milk production is going to come back. It might not be for the month of December, the month of January, but sooner or later the production is coming back.

00;09;29;19 – 00;09;48;12

Production is coming back. And I just don’t know how to predict that. I recognize that milk is tight in California right now. I recognize that nonfat is tight in California. There is no doubt about that. And again, you can say, doesn’t matter that we didn’t get the exports because we didn’t have the nonfat to export. However, I just can’t take my eye off the ball as saying every other state has rebounded.

00;09;48;12 – 00;10;01;22

You know, when they come back, it comes back with quite a bit of milk. And in California, I think it’s going to result in more nonfat production or nonfat production needs to be exported. And I think that means that the price at this point in time, the price is going to have to come down. Maybe in the next few months.

00;10;01;22 – 00;10;17;27

The international markets strengthen and provide us the ability, you know, to export at the current prices. But my guess is, is that we’re going to see the U.S. price go down. And I think when we look at the nonfat futures, they’re kind of meeting us half way, right. They’re saying, yeah, we’re going to go down, but we’re not going to go all the way down to those prices.

00;10;17;27 – 00;10;25;28

They’re certainly discount to the current spot market, but also higher than the rest of the world, especially on this first and second quarter.

00;10;26;00 – 00;10;44;23

Awesome. Well, John, I appreciate the deep dive into the first GDP of 2025. And our next one is going to be two weeks from now on the 21st, we should be back in our two week rotation for a little bit of time here. Then we kind of jump in the first week of February. So with that, we appreciate everyone tuning in and listening.

00;10;44;23 – 00;10;55;02

If you have any questions, comments, concerns, please let us know. We’d love to address them. As far as the auction, but until next time John. Again, thank you’ve been on everyone. Thanks for listening. We’ll see you later.

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