Daily Update: Different perspectives

Yesterday was a typical start of the week with low interest from buyers and sellers. That is why Mondays are good days to chat with our counterparts about the market. The funny thing is that different partners point to the same facts, but view than as having complete opposite effects on the dairy market. And it made us think about two images that we will highlight below. It is the famous #TheDress and the less famous #TheSneaker. These two pictures show that the truth is always in the eye of the beholder.

The Dress is a picture of a black and blue dress but is seen by almost 60% of the people as a white and gold dress. The picture broke the internet and dived the world. The sneaker is clearly pink and white, but some see a blue sneaker. Everyone who looks at these pictures has the same information, but somehow our brains process the information differently. It doesn't really matter if you are wrong about the colour of the dress or the sneaker, but being wrong about the market might cost you (or the organization you work for) a lot of money. So it is wise to ask your colleagues, partners, other traders and your favourite brokers, what colour do you see on the dairy market?

Gas prices down, bullish or bearish?

A good example is the lower gas price in the future market. Today Dutch Gas futures traded below € 100,- again for the first time since June. The trend is still down and lower prices are still expected. But is this bullish or bearish for the dairy market? Some say that production costs might come down a bit more so producers are faced with a lower cost price. This might give some room for lower prices; so lower gas prices are bearish for commodity prices. Right? But you could also argue that a big part of inflation is caused by high energy prices. If these prices are coming down fast, we might see lower inflation and less impact on food consumption. So if demand stays ok, we might see higher prices again.

Developments in Ukraine, bullish or bearish?

The situation in Ukraine is keeping a lot of people busy. And it is a bit strange to speculate about market prices in how the war will develop, but it is (and has been) a major influence on the dairy market. But would a further escalation be bullish or bearish for the prices of dairy commodities? We have had several debates about this, but with several outcomes. Stability might lead to more confidence from consumers and stimulate demand which is bullish for prices. But a further escalation might cause higher cost prices worldwide and less food security which is also bullish for prices.

We have been sharing our thought on the market for a while now, and we know we sometimes don't make everybody smile. But we paint the picture of the market with the colours that we see and that are presented to us. So if we are a bit bearish on the market it is because the information we see is interpreted as bearish, but it doesn't have to be. We are therefore thankful for those people who share their insights about the dairy market and sometimes throw some different colours on our pallet. We encourage all to keep doing that. And in the end, you can still critizie my art and I won't be offended.

Looking at today's colours we see the market a bit at ease. The bearish sentiment is still dominant and we still expect to see further corrections, but it is clear the market took a breath today and traded stable. But tomorrow the market for liquids can paint a much darker picture.