The Power of the Past

The markets are a bit more active and we have been able to broker a bit more deals yesterday. Although sellers were trying higher levels, during the day we saw that some producers decided to come back down to last week's levels as it is clear that on higher levels buyers are stepping back out. And during the flush, it seems most producers don't want to face the pressure. But most deals we broker are done for Q2 as Q3 remains haunted by the memory of last year. 

One of the traders we spoke to described it quite simply, it's the ghost of last year that is still haunting the memories of most buyers and sellers. The fear of an expensive H2 pushes buyers to lock in contracts, and sellers to stay out of them, creating an imbalance and pushing up prices. We see the same now with consumers locking in long-term year contracts again with their energy suppliers. We have been doubting to to the same. And even if the prices for energy and gas are 3 times higher (3 times!!!) we, and a lot of other consumers, are considering locking in these prices as we fear the prices of last year. Sometimes the fear of something that happens is stronger than the rationality it seems.

Meanwhile, markets are turning a bit more bearish. We see lower butter trades, and lower SMP trades, only cheese is keeping relatively well. The market for liquids is a bit shaky. Cream at the end of the day seems a bit weaker, but smc demand is strong. SMP offers for closeby remain weak, but prices for further out remain quite ok. Buyers prefer certainty over probability it seems. And most confirm that even on higher levels, the margin is still great.

Looking at the international markets the USD/EURO fx rate broke the 1.10 and is now at 1.105. As one trader put it, the difference between two weeks and today's exchange rate is my margin to my customer when I sell in dollars. and keep the same euro sales price.

So looking at the market we think we can pull out the old "driving a car" analogy again.

"It's important to watch in your rearview mirror every now and than to look back, but the most important part of the journey lies in front of you!"

At the moment it feels like most are still looking in the rearview mirror with their foot hovering between the break and the gas pedal. But if you want to stay in the driver's seat in this market, we advise them to look ahead to push the gas pedal to get ahead of this market.