GDT Review: Powder Markets Lead a 6.7% Surge

Transcript 

00;00;00;09 – 00;00;21;03 
Unknown 
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. Hello everybody. Welcome back to another GDC Tuesday. We are technically having this show on Wednesday morning, the 4th of February. New Zealand had a little bit of a glitch in their computer system to push out the global dairy trade information. 
 
00;00;21;09 – 00;00;44;01 
Unknown 
So we got late last night and John and I are here with you live live on Wednesday morning to go through GDC. This event, John, up 6.7% from yesterday afternoon, quite a long global dairy trade. It went 20 or 25 rounds I believe it was. That’s what I told so long global dairy trade longer one that I can remember. 
 
00;00;44;04 – 00;01;08;07 
Unknown 
Yeah it certainly was. And there was certainly a lot of buying to be done on there and not as much product to be sold. If we look at comparing it to the last auction, we were down 7000 metric tons on the offer, on the maximum offer, and the amount that was sold that actually traded off was down over 3000 metric ton. 
 
00;01;08;07 – 00;01;33;24 
Unknown 
So we’re just in that time period of the season where we have ever declining offers, and we typically see buyers step off during this time. And for a lot of reasons, buyers seem to be stepping in and trying to soak up product during a time when the offers are moving lower. Is there a specific place that you’d like to start today? 
 
00;01;33;27 – 00;02;01;23 
Unknown 
Butters, powders, cheese? Or let’s just run through the deck here. I would say mozzarella was the big stars here, up 10.6% to $1.68. I think that for the people that pay attention to try gonna. This may not have been a surprise. I think Trigun has been listing European March prices as having moved a little bit higher over there for the last few weeks. 
 
00;02;01;26 – 00;02;32;11 
Unknown 
I think the flat price has gone up, but also the currency has caused prices to go up a little bit over there and when it translates back here to the mozzarella, price is generally a European price and it brought itself up to that. Try going up monts level on the cheddar side. Cheddar prices up 3.9% to $2.16. Again, very small amount of product that trades on the get from a cheddar side of things. 
 
00;02;32;14 – 00;03;01;19 
Unknown 
However it is there and it traded at $2.16. As always will encourage people if we’re trying our best to compare apples to apples here, it’s probably easier and a better comparison. To compare GTI mozzarella to the CME price as opposed to GTI cheddar compared to the CME, simply because the mozzarella price is what we will trade against in the export market. 
 
00;03;01;26 – 00;03;24;04 
Unknown 
Or set another way, if we’re going to have our export market has been led generally by mozzarella sales and in order to compete, we have to be competitive with the EU mozzarella price and the New Zealand mozzarella price. But it’s really the EU price here. As we get to the fat side of things, AMF up 5.4%. That was pretty healthy. 
 
00;03;24;09 – 00;03;51;06 
Unknown 
But the butter side of things was up 8.6% to $2.62 on an 82% fat level. I think that we’ve seen prices start to rebound there as well and stabilize. But then when we get over to the powder side, I think this is really where the fireworks of the show, if you will, really were set off on the whole milk powder side, whole milk powder was up 4.8%. 
 
00;03;51;08 – 00;04;14;11 
Unknown 
That in itself is important on the whole milk powder side. Just looking at the chart here, this is the third auction in a row that we’ve gone higher, and this is really the highest price. We’ve been in whole milk powder since going back into October. So if you remember, in the fall we saw prices just go lower and lower and lower. 
 
00;04;14;11 – 00;04;44;02 
Unknown 
And then finally we caught a bottom. And we’ve seen a pretty nice appreciation. Now from the bottom I would say we’ve seen whole milk powder rally about 12.5% from that bottom price there in the middle of December. However, I think to me, the one that I am most focused on here is going to be the skim milk powder price skim milk powder prices were up 9.9% on the average, coming in at $1.30. 
 
00;04;44;08 – 00;05;15;14 
Unknown 
And I think this is just really relevant to the discussion that we’re having here in the US about US prices and what’s going on. We’ve seen the US skim milk powder or nonfat powder price move extremely aggressively. We’ve seen it move aggressively higher over the course of the last few weeks. We are now at a dollar 50 on the CME, and I bring that back to the GT price, because the GT skim milk powder price did make a significant rally. 
 
00;05;15;21 – 00;05;44;18 
Unknown 
But it’s made its way to $1.30. And I think that’s just important to point out here that there is a huge discrepancy between the US price and the rest of the world, but the US nonfat market has started to move significantly higher, and it seems to have really caught buyers off guard. And with the US price being as high as it is, I think it’s begun to make the EU and the New Zealand price look relatively cheap. 
 
00;05;44;26 – 00;06;15;17 
Unknown 
Again, I’m just going to go even after that significant rally yesterday. I’m just looking at the New Zealand price at a dollar 32.5 on the front end, and if I go to the European price on the same product, I’m looking at that and we’re at $1.27. These prices on the GTI came up on skim milk powder, but still trading at a significant discount to the US market. 
 
00;06;15;19 – 00;06;37;19 
Unknown 
Now, I think that has implications in both directions. One is that if the US price stays as high as it is, that continues to probably make the rest of the world look relatively cheap, and buyers are going to continue to scoop up that cheap product in New Zealand and the EU, and probably continue to keep their prices go higher. 
 
00;06;37;19 – 00;07;01;29 
Unknown 
And at the same point in time, with the US prices as expensive as it is now, one can probably guess that we’re not going to be very competitive in the world market and buyers are going to continue the buyers that can, on the international market are going to continue to buy products out of these other regions and not out of the US, and we could see the US price come lower. 
 
00;07;02;01 – 00;07;29;23 
Unknown 
But I guess I would just have to say to me something that is dominating the conversation of the world dairy market right now seems to be the US nonfat market. And I think as the US nonfat market has moved higher, it has pulled the powder markets higher in the rest of the world. And as that’s happened, that puts a bit in the whole milk powder and that puts a bid in the to the fat markets. 
 
00;07;29;23 – 00;07;52;22 
Unknown 
And I don’t want to take away from the potential strength in the global markets. But I again, I just can’t help but see that there’s a little bit of a knock on effect coming out of the US markets and having an effect on the rest of the world, and we see it in these prices. On the GDP yesterday, Cody was you mentioned, John, there wasn’t as much product being moved in. 
 
00;07;52;22 – 00;08;10;28 
Unknown 
We’ve talked about the past couple of shows that we’ve done for global dairy trade, but was there anything that really stood out on the product moving front? Was there one region that really stuck out? I know China, as you mentioned, was not in the buying seat that haven’t been for quite a while, but was any kind of light on that side of the world. 
 
00;08;11;00 – 00;08;38;06 
Unknown 
You know, we have a GTI wrap that’s published by Egg Insights, and it has a lot of great data in it. I encourage listeners, if they want to take a look at it, give us a call or email us, and we want to get that to you just as a nice job wrapping things up. One of the things that I can point out in here is that just some statistics that come out of this is that Chinese participation on a whole milk powder was high, right? 
 
00;08;38;06 – 00;09;13;18 
Unknown 
And they were a little bit out of the seasonality when it comes to skim, though, they were well below. And when it comes to skim for Southeast Asia, they were well below. And unfortunately I can’t see into the other regions right now. But I believe I’m guessing that the Middle East was a big buyer, and I’m also guessing that the US and Europe might have been a bit of a buyer on skim coming from, you know, maybe some people that were looking on the international side of things, looking to get a hold of some of that cheaper valued products out there. 
 
00;09;13;23 – 00;09;38;01 
Unknown 
But all in all, I don’t know. I guess I just continue to look at this and say, this feels very much like an auction that was dominated by the powder markets. The powder market, in my opinion, seems to be a knock on effect of what we see going on here in the US. And there are a lot of reasons here in the US that we can look to towards nonfat being higher. 
 
00;09;38;01 – 00;10;03;00 
Unknown 
However, I guess I see the US market as having these the spillover effect. But I’m open to discussion to any and all people that might have a different opinion on that, and I encourage you to let me know. But I still do think it’s important to point out that the New Zealand and EU markets continue to trade at a discount to the US on the powder side. 
 
00;10;03;02 – 00;10;20;27 
Unknown 
Perfect. Thank you, John, for your insights on this global dairy trade. We’re sorry everybody, that it came out a little bit late. Something that was out of our hands this time, but still trying to get you that information as fast as we can. As John mentioned, we do have the other insights GDP wrap that comes out. If you do not get that, if you would like to get that, please get Ahold of us. 
 
00;10;20;27 – 00;10;34;22 
Unknown 
We’d be happy to send it to you. John and I are going to be back in two weeks. The 17th of Feb is the next GDT auction and until then, we hope you guys have a great rest of the week. Even better weekends. We’ll see you next time on the GDP Tuesday podcast from over at.