Low Trades Attract Cheap Buyers

Yesterday was a difficult day to broker trades between buyers and sellers. With bids sinking to the bottom, it is hard to find a common market price where buyers and sellers can find each other. The market for liquids seems to be trading steady at roughly the same prices as last week, and EU quotations for butter, SMP and whey didn't move down enough to set the market in motion. The result? A quiet day without much movement. 

Whenever a tender, a GDT event or any significant other market event trades lower we see two clear steps. Step one: the early sellers! These are usually traders who acknowledge the changing market sentiment/direction and they jump ahead of the market to get rid of stock or take a short position to profit from the expected lower market prices. Step two: cheap buyers scare away the sellers. The second wave of phone calls usually doesn't come from sellers but from buyers who hope to profit from the bearish sentiment. But by coming in all at once, and bidding the prices down too fast, it usually leads to sellers taking a step back again. These same patterns are the same when the market moves up.

Yesterday was not different from the steps described above. On Tuesday we saw sellers come in aggressively, but yesterday the buyers showed up with their even more aggressive bids, pushing the sellers back into the office. Step three usually is one or two days of a standoff, where buyers and sellers won't move. And unless we have now reached the bottom of the market (and we don't think we did) we should expect the sellers to slowly return by the end of this week/or the beginning of next week. Because most of the buyers that we see are aiming for low purchases in Q4 and Q1 and have plenty of time to wait. Sellers have the pressure to sell close by and will eventually feel the pressure to sell, either much lower for closeby, or at a small premium for further out.