Daily Dairy Digest: Be More Agile!

Yesterday was a very active day with all activity from our side focussed on the butter market. It seems older stocks are being moved around across Europe. But sometimes it feels that the butter is only changing owner, and is not going towards a customer. It's traders selling to traders, who are selling again to other traders. But by trading this way, the butter does go down in price but doesn't disappear from the market. The stock pressure remains the same, only the price is changing. 

We have seen the same happen last year. Butter, cheese or powders got traded higher and higher every week, but the product was not sold to an end user, but only as a position to a trader. Only when the price was up more than € 1000,- per mt, the butter was sold onto the market. It can be a frustrating phenomenon to watch when you are on the sideline. When partners are on the wrong side of these speculative trades they are usually not that happy, but when it benefits them, it's just simple market dynamics doing their work. There is a little bit of hypocrisy in every one of us.

We wanted to address the point that the volatile market is caused by traders, and traders get the "blame" for what is happening in the market. But we think that the high volatility isn't caused solely by traders, but is mainly caused by the caution and conservative character of the producers and end users. We think that the agile character of the traders is giving them the advantage to move quickly in a highly volatile market. As a former trader, I can honestly say that most traders do try to get the producers and end users involved as much in their strategy. Moreover, most traders would rather see the market a bit less volatile than it is today, as this volatility also brings enormous risks and frustration.

That said, it feels that in the first 10 days of the year, not much has changed apart from the price. We see more offers than we have demand, we see older stock and hesitant producers. Today we traded a lot of butter from Q2 of last year, we wonder why it was kept this long in the freezer.