GDT Review: China Steps Back, Southeast Asia Steps Up

Transcript

Doing great, Cody, and excited to be here once again on this beautiful June day

Oh, we are happy to have you here looking into the latest Global Dairy trade. It is June 2nd, 2026. We are going over today’s GDT events. According to the auction, down 0.6% as an aggregate. We have got skim milk powder that was down 2.7, whole milk down 1.7, cheddar cheese up 1.3, but mozzarella, mozzarella down 4.5% on today’s auction.

John, where do you wanna dive in first?

Let’s start, as you said with the powder side.

Skim milk powder down 2.7%. Let’s keep in mind, though, that is an average of the European and New Zealand price. The European price really got beat up here, down to $1.47, whereas the New Zealand price held together pretty well and beat expectations here versus the futures. So the New Zealand price coming in at $3,500 a metric ton to $3,550 on average, I would say, and futures were looking for about $3,420.

So we did hold it together. If we translate that to a dollars per pound price, that’s about $1.61. So New Zealand skim $1.61, European going down to $1.47. That one, r- the European side really went lower. As we move to the whole milk powder contract, that was down 1.7%, and I would say if we were to look at the result of this versus expectations, I would say, “Eh, it came right around in, right around there.

Maybe a shade higher than expectations.” So again, New Zealand skim did a little bit better than expectations. Whole milk powder definitely did. European prices on skim really getting beat up here to $1.47. Moving over to the fat side here. AMF was up 5.1%. I think people were looking for a little bit higher here, so maybe that beat it.

AMF has really gotten beaten up over the last few auctions versus butter, so I think that was really more of a recalibration. When it comes to the butter side, please keep in mind this is an 82% butterfat. It’s a little bit different, but came in at $2.60. That was up 1.1%. I think that was relatively in line with expectations.

So the fat side though, both of those substantially higher than the US price, which even after today’s higher spot price came in at $1.71. If we go to the cheese side, and again, we always want to point out the idea that cheddar cheese is New Zealand cheddar, mozzarella is European. When we are trying to create somewhat apples to apples of the US cheddar price, obviously it seems tempting to go to the cheddar price and compare cheddars, but we tend to look at it as a mozzarella comparison.

And we export a lot of mozz out of the US, a lot of it is based off of the CME cheddar price. If we’re gonna compare, are we gonna get exports or not? We wanna look mozzarella to mozzarella. In this auction, mozzarella in Europe came down 4.5%, settling out at $1.79. That gave up most of the gains that happened on the last auction.

So now European mozzarella at $1.79 we can talk about it in a minute, but again we tend to look at it to say somewhere between 25 and 30 cents difference from the European mozz the US can export, reliably export. So at $1.79, taking 30 cents off that’s $1.49. Where are we at right now on the block price at the CME?

We’re at $1.4750. So we’re really only slightly below that price that we would say really gets exports. And then wrapping it all up, the aggregate auction was down about 0.6%. I’m willing to bet that, for most people looking at it and saying whole milk powder is the big engine of this thing the heaviest weighting, and skim milk powder is right there behind it.”

Those were both down 1.7% and 2.7% respectively. And then you say the cheese was up a little bit and butter was up a little bit, but h- how do we only end up 0.6 lower? I think when it comes to the aggregate index, there tends to be different way of calculating specifically in contracts that might not have traded in this auction that did trade in the last.

At first blush, I think we’re probably, we could say that the index was lower than 0.6, but on the official report it’s gonna say down 0.6.

Yeah, I think we’re in the same spot as far as mozzarella compared to our block as we were two weeks ago as far as the spread for potentially getting some exports out of this country, which is super interesting

If we go back in time to January we saw the CME go to $1.30 and it went outside of that 25 to 30 cent band and we said, “Boy, I bet we’ll get exports or we should be getting exports.” And it didn’t feel like we were getting them all at once there, but as we went into February and March, we came across record exports, and I don’t believe those were done during the February and March period.

They were done, those exports were cut in January when we were such a discount to the rest of the world. I’m guessing that’s what we’re doing right now, that we are capturing exports. The spot market’s heavy right now. We’re capturing exports for both current and forward shipments, and I wouldn’t doubt it , as we move through the summer, if we don’t see the export numbers stay relatively strong.

Little bit of a delayed reaction is what you’re saying?

That’s correct

Perfect. Let’s move into the purchases by region. Before we do that or while we do that, do you wanna tell the folks what our esteemed colleague Vuko just kinda let us know that you told me before we jumped on here, I didn’t even see, a very interesting little snippet

Yeah. We always keep track of the regions of purchasing. When it comes to China, they’re always the heavyweight here. We’ve traditionally always followed them and said, “Boy, if China’s here, we\- go up, and if China’s not here, we go down.” And I think in general, that’s a pretty good narrative and rule of thumb to follow.

China’s participation has been dwindling here over the course of the last six, seven months. It’s just, when we look at it compared to the years before, sometimes it’s a little bit higher, but a lot of times it’s been lower, and it’s re– this whole 2026 year so far seems like it has been dominated by the Middle East and Southeast Asia, with China really taking a backseat.

When this auction was over with as you said, Buco from our insights team was able to point out this was the lowest volume sold to China since mid-June 2011. So this was, in aggregate, China bought the least amount of product that they’ve bought in 15 years. In terms of whole milk powder, this was the lowest event that they bought since July of 2023.

So China has really stepped back their participation. My one warning to this before anybody, go, runs too far with this is to say this is the time of the year when we are at our lowest volume offers on the GDT. Traditionally, China buys their least amount when we are at our lowest, and when volumes start ramping up, they buy their highest amount.

But this, that’s a seasonal pattern that happens every year. So yes, seasonally they buy less, but on this auction, they bought even less than they normally buy from a seasonal perspective. Now, you might say then how in the world did the price only go down 0.6% if China had that little participation?”

And again, I think it comes down to let’s look at some of the other regions. Southeast Asia bought 69% more on this auction than they bought on the, this same auction last year. That’s a big number. And then when we go to the Middle East, they bought a little bit less than they bought year over year, but compared to the last auction, 120% higher.

These are big numbers. And this is something I’m sure these lines have crossed before, but I just haven’t paid attention to it. I– But I know this one is gonna be really exacerbated. If we just look at total volume, China bought, a little bit more than 3,000 metric tons on this auction.

Southeast Asia bought 6,400. So Southeast Asia actually bought over twice as much as China did on this. And I’m sure that’s happened before to varying degrees, but this one is really, a big stark difference to what we normally see behavioral-wise.

So again, Southeast Asia really stepping up and buying a lot of product. As to what is driving that behavior, I think we’re still looking at it through the lens of, in many of these countries in Southeast Asia, food inflation is a real political risk to the governments. They’re– With crude oil moving so much higher and many other commodity costs moving so much higher, there may be a push in here to front load and get some of this product in the country while it’s at a relatively cheap price compared to many other products.

That’s a theory that’s been bandied about. I’ll accept arguments against it. I’m not sure that I’m totally sold on that idea. That is just one theory. But nevertheless, Southeast Asia has really been aggressive, and I think in their absence, the GDT would’ve been significantly lower on this auction than it was, simply because China’s participation has been and continues to be so darn low.

I just wanna give a quick shout-out to Vuco on our insights team. What a great statistic to post for the GDT auction. I mean, 15 years it’s been since they’ve essentially bought less than this. You know, Even to your point of being this time of year where it’s the lull of them buying, like that is a massive amount of time it seems like for a big country like China

Vuco and the insights team live inside of this data, and I encourage anybody listening if you have any sort of inquiry or are interested in statistics like that and running something down, please reach out to us because their database and their ability to run that down is pretty darn impressive

Yes, it is. Yes, it is. John, anything else? We covered a lot on this GDT auction. Anything else massive that stuck out to you today?

No, that’ll do it. O-other than to say the non-fat dry milk price at 215 today, significantly higher than the skim price , in New Zealand and specifically out of Europe. And I think that continues to pose an export challenge to US product. And as the US moves through these supply chain issues here on non-fat and we have free to sell that needs an export market, I think the price to export product from the US is significantly lower than where it is right now

Awesome. John, thank you so much for your insights on the global dairy trade today. John and I will be back with everyone in about two weeks, the middle of June, for the next GDT auction. If anyone has any questions, comments, concerns, would like to see more of Vuco and the insights team, amazing statistics that they have, please reach out.

It really is great. People love to look at that stuff and read it all the time. Their information is just it’s tier one, to be honest. So please reach out to us and we will get you whatever you need and you wanna see. But until next time, get out there, enjoy the beautiful summer that we’ve already just started to have here, and have a great week, even better weekends.

We’ll see you in two weeks, folks