Impatiente Partners (A Bullish Signal?)

Yesterday the market softened again a tiny bit, but the buyers would like to see the market change a lot faster than the sellers. Previous years of extreme volatility have made our partners (and us) used to extreme price changes and big moves in prices. Those who trade powders know that prices can trade within a tight range for a longer time, but our partners in the market with a focus on butter and cheese can't understand the slow price development. 

We have traded butter for most of our professional dairy career and prices have the habit of changing on a daily if not weekly basis. Price swings of € 200 up to € 300 per week are not uncommon especially not in the first months of the year when cream prices are extremely volatile as well. We have seen these price swings as well in the previous year but this year the price changes for the commodities we broker feel slow and with tiny steps. But as we told one of our partners earlier today, it might feel as if prices aren't moving, but they are moving!

Butter prices have moved down since the beginning of the year to roughly € 350, (that is more than € 100,- a week per mt). Not only in our physical market prices have dropped, but we have seen the same move on EEX futures. Cream prices have come down over € 500,- in less than three weeks as well and today we heard prices were further under pressure. Cheese prices are less volatile, but we also see a price change of roughly € 150,- lower offers within 3 weeks of this year (€ 50,- a week). Only SMP prices haven't show any real changes although we see the price pressure from unsold Q4 stocks pressing with the same force in the month of January.

But even with these price changes, it feels our partners are a bit dissatisfied. Admittedly, we work a lot with traders and they favour high volatility above anything. But also at the end-user's side, most partners would have expected a more significant drop in prices, and it feels some have anticipated bigger price drops as well. That might be telling more about their needs, than about their expectations. On the other side, producers acknowledge they need to move down with the price, but unlike other years, so far most have been able to keep the pressure as low as possible so big price drops are not necessary. (yet)

We remain bearish on butter and cheese prices for the short term as we see more product arriving on the market and fewer products being picked up. But the tension we feel among traders and end users about the slow pace of price decline is maybe more telling than most will admit. It doesn't take a whole lot to put the market back up at the levels we started the year on, because impatient people tend to make impulsive decisions.