GDT Review: GDT Rallies Again, But Supply Still Looms Large

Transcript 

00;00;00;09 – 00;00;20;18 
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 podcast. I am your host, Cody Koster, with me from Chicagoland, Mr. John Spain, our John, how are you today? Doing great. Cody and so excited to be here. 
 
00;00;20;21 – 00;00;48;12 
Unknown 
We are happy to have you here on this Tuesday the 20th of January 2026. We had GTI Tuesday today and the whole event of 1.5% going through some of the biggest headlines, if you will. Right. Skim milk powder up 2%, whole milk up 1.2. Cheddar cheese down 1.5. Mozzarella down 2.3. Just hit on some of the namely ones. 
 
00;00;48;12 – 00;01;13;02 
Unknown 
Is there a place that you want to start out jam. Well, let’s just start out by saying yes, it was higher. This is the second overall higher auction in a row. The standout here would be let’s start out and go from the biggest gainer of the day. And that’s going to be AMF up 3%. That continues to try to climb on the relative value to butter. 
 
00;01;13;02 – 00;01;39;20 
Unknown 
If you remember, I am a really separated in value from butter a while ago. Losing more value, it felt, than what the overall butter fat value was. And so it was up 3%. And then we go to butter up 2.1%. And if we were to take that butter price and put it on a US dollars per pound equivalent, and well, really going into an 82% here, we’re talking about $2.41. 
 
00;01;39;27 – 00;02;08;24 
Unknown 
So if we bring that back to a US butter equivalent, we’d say it’s about $2.35 out there. At the same point in time, the US butter price is quite a bit cheaper than that right now. Came up today five and a half cents, but still sitting at $1.41. A significant discount on the butter fat side. When we go to the cheese side, the cheese market here on the GDP over the last few auctions performed relatively well. 
 
00;02;08;24 – 00;02;47;14 
Unknown 
The cheddar price this time, though, down 1.5%, coming in at a price equivalent of about $2.08. Again, I do want to stress it’s very tempting to say we’re block cheddar and they’re cheddar. Those are what we’re comparing to a certain degree. Yes, but cheddar in New Zealand is generally going to be different than cheddar and the EU and cheddar in the US with different specifications and a lot of times different values assigned to them by the potential buyers in the marketplace, where we want to look at the best one that we can look at for a comparison is mozzarella. 
 
00;02;47;17 – 00;03;17;09 
Unknown 
Again, the mozzarella price here on the GDC is generally an EU price. That mozzarella price came in today at a dollar 52, down 2.3%. That is important because when we look at the exports here in the US is generally where exporting mozzarella to the contestable markets mean. The places like South Korea and Japan, where we really fight to get inside of those marketplaces and we fight to get in there via price. 
 
00;03;17;09 – 00;03;42;11 
Unknown 
And so the wider the price spread between the US is to the EU price, generally, the more exports we get, we saw the US price be significantly higher than the EU price back this fall. Right. And we did not get exports here for Q1, or at least so far a pretty decent amount of Q1. And as a result, our prices dropped. 
 
00;03;42;16 – 00;04;09;09 
Unknown 
Now the US price is significantly cheaper than the EU price, but not as cheap today as it was going into the end of last week. Again, the mozzarella price is down 2.3% to $1.52, and the US bond price today rallied to $1.33 50. So we’re inside of that 20% range in here. Maybe there’s a little bit more upside here in the US side. 
 
00;04;09;15 – 00;04;33;17 
Unknown 
But if we go much higher we’re probably going to see export potential cut off here at least on a spot basis. And then finally, as we get into the powder side of things, we’ll look at the skim milk powder side first. Skim milk powder came in up 2% at about $1.19 on the New Zealand medium heat price. What I would point out on that is that again, that is up 2%. 
 
00;04;33;19 – 00;04;55;05 
Unknown 
The US price came in today at a dollar 25.5 this morning. The New Zealand skim milk price seems like it caught up to the US price a little bit here. And I think that maybe gives some space for the US price to continue moving higher. It did indeed. It went up a half cent to $1.26 here. And the US. 
 
00;04;55;07 – 00;05;16;28 
Unknown 
However, I would just point out that higher is higher. But this did seem to come in a little bit lower than what the futures were expecting here on skim milk powder, they were looking for more of a 4% gain. We got a 2% gain. I don’t know. That’s the most bearish thing I’ve ever seen, but it does cut a little bit at the heart of the bullish factor out here. 
 
00;05;17;00 – 00;05;40;27 
Unknown 
And then finally I would say moving to whole milk powder. Whole milk powder was the one that had the big jump on the last auction. We saw some follow through here today, up 1.2% to $1.56 a pound equivalent. When we compare that to the futures side, I think it came in. I’m going to go ahead and say right around where futures were predicting. 
 
00;05;41;00 – 00;06;05;01 
Unknown 
So that one came in within expectations. And I don’t know that there was much of a surprise there. So if we move ourselves over to the total purchases by region for this one, John will kind of look at it. And I know you some the amount that’s been trading hands the past couple of auctions has been slower. But China in the Middle East down today GDP purchases but Southeast Asia up. 
 
00;06;05;04 – 00;06;34;27 
Unknown 
Is this just normal seasonal swing in your opinion or something else happening here? I think the first thing we want to state is the volumes on this auction were lower than they were last auction, and that auction was lower than they were the auction before that. And as you get to the end of October, we start to transition from high volume offers on the GDP to lower volume offers, and they’re going to get progressively lower. 
 
00;06;34;29 – 00;07;09;07 
Unknown 
So I think the first place we need to start out with is the idea that the auctions just from a seasonal element. Now, as we go all the way into through June, right, all the way up until the beginning of July, they’re going to get progressively smaller. And I think that is just so important to point out. And know that in the past, the Chinese, who are traditionally the biggest buyers on the GDP, tend to say, I want to buy the most when the volumes are at their biggest and I’ll have the least amount of effect on price. 
 
00;07;09;10 – 00;07;37;15 
Unknown 
And when the volumes are decreasing, I will back off. That still seems to be the case here. I don’t know that the Chinese have changed their behavior very much here. So then you say, but Jaren, prices are going up here. What’s going on them. And I would say the first is that I think that if we just look at a historical participation from the Middle East, they have traditionally been a pretty small player. 
 
00;07;37;17 – 00;08;02;23 
Unknown 
And as of recently they’ve moved out of the stage, left and really moved to center stage here. They’re not going to be as big as China. They probably never will be. But for reasons that I don’t quite get, at least right now, they seem to be buying more than they normally would. And that I guess Southeast Asia is to a certain degree, but nothing crazy. 
 
00;08;02;29 – 00;08;27;28 
Unknown 
I would say that really the effect we’ve seen of here, the bullish element that we’ve seen on the GDP is that the Middle East, they’ve increased their buying participation in the first place. That’s one bullish factor, but they’re also doing it during a time when there are less product on offer. On the GDP. So it’s having more of an outsized effect on pricing. 
 
00;08;28;00 – 00;08;51;01 
Unknown 
And I think in the absence of this Middle Eastern buying, we would have seen the auction look a lot different on today’s auction. And the last auction for sure. Is there anything else on this last auction of January that really stuck out to you for guys today? You know, we talked about it last time. We’d been down nine auctions in a row when we got a 10th auction that bumped a little higher. 
 
00;08;51;08 – 00;09;14;19 
Unknown 
I think this was more of a follow through to that. Again, a little bit of an outsized effect here from Middle Eastern buying, I guess. I just look at it to say I absolutely respect the price action. Maybe things did get a little cheap, but if we just look at it from a broader perspective here, I would say we still have big milk production here in the US. 
 
00;09;14;22 – 00;09;34;27 
Unknown 
We still have big milk production in Europe, and now we see that New Zealand’s milk production for the last month is up 3%. Right. We continue to see numbers coming out of South America that are pretty big. The milk is still here, right. And we haven’t solved that problem if you want to call it that. I hate to call that. 
 
00;09;34;27 – 00;09;59;03 
Unknown 
I’m just saying from a price perspective, the fact that we’re down and where we’re at and pricing has more to do with supply than it does with demand, in my opinion. And we haven’t yet seen supply here in the United States, nor around the world really starting to shorten up. And with that being said, I think there’s going to be room for bounces like we’ve seen here in the last couple auctions. 
 
00;09;59;05 – 00;10;14;10 
Unknown 
But overall, I would look for them to be bounces and not significant rallies, at least at this point until we see milk production start to really change. It’s a very fair point, and we get our milk production this coming Friday. So we’re going to find out what that was for the month of December too. Looking forward to it. 
 
00;10;14;12 – 00;10;33;10 
Unknown 
Awesome, John, appreciate your insight into our GDP Tuesday. John and I will be back with everyone in two weeks in February for the next Global Dairy Trade auction. If anyone has any questions, comments, concerns, please feel free to get Ahold of us and we will address those as needed. But until the next auction, have a great week. Even better weekends. 
 
00;10;33;12 – 00;10;34;07 
Unknown 
We’ll see you next time.