The Buttercoaster: Extreme Volatilty

Those advocating for us to rebrand to "Get Fair Butter" make a valid argument. Recent updates have predominantly focused on the butter market due to its high volatility and substantial trading volume, capturing most of the attention. In contrast, the powder market has exhibited sideways trading for several months, with minor fluctuations, and the cheese market remains within a narrow range. However, the onset of this week brought one of the most remarkable days for butter in our professional dairy trading experience.

Beginning the week without any new fundamental data, the butter market experienced heightened volatility. Fueled by increased trades on the EEX, butter prices surged from €6200 in the early morning to €6550 before noon. The physical market followed suit, trading approximately €400 above Friday's closing at €6350 fca NL. The latter part of the day, however, witnessed a shift with more sellers, causing prices to decline. Futures concluded at €6125 (€75 below the day's start), and physical offers closed at €5850 - €5950 without attracting any buyers.

The rationale behind these drastic price movements remains unclear, possibly attributed to emotional or sentimental trading. As previously mentioned, data suggests both a tight market that could propel butter prices higher and a price cap of around €6000, which is not unexpected

Dubai Sentiment

Conversations with partners in Dubai reveal a slightly bullish sentiment on the floor. While uncertainty surrounds the expectations for butter, cheese partners anticipate a stable-sideways market. Sentiment regarding powders is not overwhelmingly bullish. Producers and traders lean toward optimism, possibly influenced by their positions rather than solid supporting data. The intense butter rally may find its roots closer to home than in Dubai.

GDT Expectations

The impending GDT session requires careful monitoring. Although SGX futures suggest a modest bullish continuation, scepticism lingers. Following a robust fats rally last time, indications point to the market being poised for a correction. The prior butter rally, fueled by a select group of buyers, could be viewed as a one-off event. While futures don't explicitly predict a substantial correction, it wouldn't be surprising.

For powders, future data does not reinforce bullish expectations. A strong competition among buyers is needed to elevate prices, but our forecast leans towards a flat result or even a slight correction. Looking at CME and EEX data we could be seeing a very boring GDT tomorrow.