Higher and Lower Prices, Both are Likely!

The week so far is trading very sideways and with low activity on the market we haven't been brokering a lot of deals. Looking at the market for liquids we continue to see more milk on the market and pressure on SMC. Cream prices also feel heavy and with fewer buyers and more sellers, the market might trade lower today as well. But with low buying activity and more milk, we only shine a light on 50% of the market. On the other side, we see little stocks, producers are very reluctant to sell and prices on futures keep trading higher. So the market feels bullish and bearish at the same time. 

Someone said that a market with equal bullish and bearish facts should feel stable, but that is not the word we would use to describe the current market. While prices are trading sideways (roughly) the market feels far from stable but very nervous. One trader told us he could see the market trade 10-15% up in the next weeks, but also 10-15% down. We can agree with this. A lot will depend on sentiment and milk data.

The sentiment can be influenced next week heavily. We have seen the EU market trade up roughly 10% on butter after the last Eucolait. A lot of partners got to the same conclusion after being in the same room for a few hours. With Dubai Gulfood around the corner, a similar (or bigger) reaction can be seen next week. We are not going to predict if we will see prices trade up or down. Lower prices for liquids recombination with a bearish GDT might plunge the market back toward € 5000 butter, € 2800 Gouda and € 2300 SMP, but a bullish GDT with EEX futures moving up might boost prices up to € 6000 butter, € 4000 cheese and € 2600 SMP.

It feels easy to predict both a move up and down, but looking back at the market moves of last week and the conversations we had with our partners we think we are not alone in our wide prediction range. We, therefore, look forward to next week and we expect to have a clearer market picture around this time last week. In the meantime, we keep assisting brokering deals and bringing confused partners together on a fair dairy commodity price. Let us know how we can help.