Butter Leads the Latest Global Dairy Rally

Transcript 

00;00;00;09 – 00;00;19;20
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. Welcome back to another GDC Tuesday. I’m your host, Cody Cost, for coming to us live from Chicago. Mr. John Spain. Our John how are you today? Doing great, Cody, and excited to be here.

00;00;19;22 – 00;00;52;04
Unknown
We are happy to have you here on this Global Dairy Trade Tuesday. Another higher GDC today. Yes, sir. It looks like the aggregate was 3.6% higher. That is the fourth higher auction in a row. And that is coming on the heels of the auction from the previous auction. That was 6.7% higher. So we’ve had quite a considerable run higher here as we transitioned into 2026.

00;00;52;07 – 00;01;18;08
Unknown
Absolutely. All the commodities except for cheddar for the most part higher. Is there anywhere you we going to want to start at one that really stuck out to you. Let’s go with butter here real quick. On the butter side I think butter 82% butterfat was the big winner, up 9.9%, clocking in at about $2.88 a pound. I would put that around $2.80 on a U.S. equivalent base.

00;01;18;10 – 00;01;40;07
Unknown
So when we frame that up as compared to the US at $1.70, it starts to keep that window open for U.S. exports. We do believe we’ve seen some decent exports get booked. But as the U.S. price had been moving higher and the international price seemed to be drifting a little bit lower, seem like maybe we were closing that window down.

00;01;40;09 – 00;02;03;12
Unknown
But I would say if I took anything away from this, it would be that that window has opened back up a little bit on the AMF side, 3.5% higher. So butter was really the one that had the big winner on the day. As we transition over to the cheese side, as you mentioned, cheddar cheese down 0.8%, coming in at $2.15.

00;02;03;20 – 00;02;49;13
Unknown
I think it’s important to point out, as we always do, that chatter on the GDP is a little less comparable to the international price, specifically to the US price, than we would want to look at as compared to mozzarella. So is the New Zealand cheddar price at $2.15? Yes, but very lightly traded. And I don’t know that would be the greatest indication of our potential export ability here in the U.S. in order to see that, we want to shift to the mozzarella side mozzarella, which is predominantly an EU product here on the GDP coming in today, 5% higher at $1.76, I would say that is higher.

00;02;49;15 – 00;03;10;11
Unknown
But I would say that to the people that look at trade gona and some of the other reports that have come out of Europe over the last two weeks, this really wasn’t so much of a surprise and did fall in line with where we have seen spot prices trading for the last week or so or two weeks, and then finally that moves us over into the powder side.

00;03;10;11 – 00;03;49;00
Unknown
I think this is where it gets a little interesting. On the skimmed milk powder side, we would say that the average came in 3.4% higher at $1.35. I think that is important to point out that, yes, that is higher, but I would go so far as to say it didn’t come in quite as high as maybe the market had been expecting futures were indicating that we were going to see at least as much of a 10% increase on this auction today, and only coming in at 3.4%, again, higher as higher.

00;03;49;02 – 00;04;20;07
Unknown
But I do think it was a bit of a letdown versus expectations for the US market, which came into today at a dollars 60. That meant that potential international buyers had the ability to purchase at $1.35 on a GDC today, as opposed to having a buy here in the US at $1.60. And so I think it is supportive generally for powders out there.

00;04;20;11 – 00;04;45;02
Unknown
But as we relate it back here to the US, it starts to say, wow, the US at $1.60 is really expensive. And the skim milk powder price on the GDP only coming up to $1.35. I know it sounds funny to say that, but again, with the perspective of what were futures looking for and where is the US? I think this might be seen as a little bit of a letdown as we switch over to the whole milk powder side.

00;04;45;02 – 00;05;11;21
Unknown
Homo quarter was up 2.5%, and if I were to look at where futures were trading at coming into this auction, I would say the whole milk powder settled right around expectations. So I do think the whole milk powder side got it right. I think the skim milk powder had a little bit of a pent up short covering or anticipation into it, simply because of what we’re seeing here in the US.

00;05;11;24 – 00;05;40;26
Unknown
All in all, though, a positive price reaction, our result today on the GDP and again coming in at 3.6% higher on the aggregate. So we got to switch gears a little bit. Going to a purchases by region I know we’ve changed some things in the drag insights as far as how we show some of our data, but there were still some pretty decent regions buying global dairy trade for this auction here in February.

00;05;40;29 – 00;06;07;29
Unknown
Yeah, I think when we look at what we’re seeing on here from a regional standpoint, it appears as though China was still pretty active down significantly from the last auction and where they were participation was earlier in the year, but that’s no surprise. We’ve talked about it many times. The seasonal offering on the GDP is at its highest as we go into Q4, and that’s also when China does its biggest purchasing.

00;06;08;02 – 00;06;33;12
Unknown
And as we come out of those seasonally high offerings, we start to see China taper their purchases. No surprise there. I would say it looks based on these charts that I’m looking at, that maybe their purchasing was at par or maybe a little higher than it was at this point in time last year. I guess it’s really the other regions that really stand out and will make a price differential.

00;06;33;14 – 00;06;51;13
Unknown
If I had to say there’s is there one group in this auction today that bucked the trend? I would say it looks like Southeast Asia. They were up a little bit from the last auction. And if I go back and try to compare it to last year at the same point in time, it looks like they bought a little bit more.

00;06;51;17 – 00;07;14;08
Unknown
When you put that together and you end up with some higher pricing action out there right now. But I think, again, China is going to be your biggest purchaser of whole milk powder or more. Powder was up 2.5%. Everything else was up a little bit more. For me. That’s really a big statement. And I was expect that’s when we see the actual raw numbers.

00;07;14;08 – 00;07;34;29
Unknown
We’ll see. China did quite a bit of the purchasing on a whole milk powder. But as we move a little bit further through the year here, maybe we’ll continue to see their purchasing step back just from the seasonal offering aspect. John, is there anything that I forgot to ask you, big picture on this GTI? Or we could knock it out and get it all covered up.

00;07;35;01 – 00;07;59;06
Unknown
I’d say there’s two things. One is that I continue to feel like the US nonfat market has shown real strength here. We’ve talked about it. It’s at $1.60. Just a few weeks ago we were at $1.20 and here we are at $1.60. I can’t help but think that kind of jump started the entire dairy market throughout the world.

00;07;59;06 – 00;08;25;19
Unknown
We were really slugging it out down there. We saw prices falling apart on all what felt like in every region out there, on every dairy product except Dry Way and Wpix. But the cheese market, the butter market, the nonfat market all felt down in the dumps. And then we see the US nonfat market kind of lurch higher, and it seems like it brought everything with it and maybe woke some buyers up out there.

00;08;25;22 – 00;08;49;17
Unknown
So I think that’s important. And if the US is able to maintain this price action, we might see the rest of the world continue to edge higher here and at the same point in time, I do think it’s really important to point out that if we look at some of the aspects that got us into that lower pricing tier in the first place, one of the ones that sticks out like a sore thumb is milk production.

00;08;49;17 – 00;09;11;04
Unknown
Milk production in the US, milk production in Europe, and milk production in New Zealand. All kind of going gangbusters at once. So when we see price action like this, you’re forced to say, geez, but dairy production or milk production, that we trim the sales a little bit out here. Are we expecting milk production to move lower? And maybe the expectation could be there for some people.

00;09;11;07 – 00;09;29;16
Unknown
But when we look at the reality of the situation here in the US, there’s still a whole lot of milk around. When we look at the reality of what’s going on in Europe right now, there is still a whole lot of milk around, just some astronomical milk production numbers coming out of there. And I don’t think there’s any reason to believe that New Zealand is going to look that much different.

00;09;29;19 – 00;09;51;00
Unknown
So again, we’ll fall back here and say maybe the market got oversold and we’re still experiencing a little bit of a dead cat bounce, if you will. And at the same point in time, it just feels like we haven’t changed the underlying elements of the market. That much will point out here on the GDP. This is the second part of my answer for you.

00;09;51;00 – 00;10;31;23
Unknown
Cody is on the GDP as I’ve said, there are seasonal offerings when New Zealand has the most to offer. They put it up there in the fourth quarter, and that’s when people do their most purchasing and as the offerings start to taper off, buyers tend to taper off as well. All along, for the last six months or so, we’ve seen what I would consider to be some rather unseasonable purchasing or purchasing from other regions that while the Chinese have backed off, these other regions like the Middle East and Southeast Asia, have stepped in and they’re willing to participate on the GDP during a time when the offerings aren’t at their highest.

00;10;31;25 – 00;10;54;14
Unknown
And I think it just goes without saying, if you’ve got a little bit more demand during a time when supply is typically moving lower, we typically get upwards price action. We saw that going into the fall, if you will, before prices started falling. And then I think we just saw the offerings get so big it overwhelmed the market and drove prices lower and lower.

00;10;54;17 – 00;11;15;15
Unknown
That purchasing appears to still be there and a counter seasonal manner. And I think it stands that it can maybe keep prices a little bit more elevated than what we might see if that counter seasonal purchasing wasn’t there. Awesome. John, as always, appreciate you taking a deep dive into global dairy trade. John and I will be back with everyone in two weeks.

00;11;15;15 – 00;11;33;01
Unknown
We’re going to see if GTI can make us strive for five on the higher auctions, or if we get a little bit of a pullback to start out the new month, we’ll see. If you join us here on the 3rd of March. You’re going to find out from John what’s going on GTI Tuesday. Thank you everybody for listening.

00;11;33;07 – 00;11;35;23
Unknown
Tune in next time. We’ll see you later.