Sideline Voyeurism

Our regular readers know we like to humble-brag about the volumes we trade between our partners. Over the past few weeks, though, those volumes have dropped sharply, and most of our regular partners have gone quiet. It’s not the first time the market has lacked a clear view on where commodity prices are heading. But it may be the first time this year that doing nothing looks smarter than trying to front-run the market. Sitting on the sidelines and watching the market unfold might be boring, but wise. So the bench is filling up, and the game we’re all watching has become a bit dull. Nobody seems eager to step onto the trading field just yet. But history tells us that when the bench empties, it rarely happens quietly. 

So far this week we’ve traded 380 mt of powders and 350 mt of butter, both at slightly lower levels, and 200 mt of cheese at slightly higher levels. For details on our trades, go to https://getfairdairy.nl/en/dashboard and see what traded per deal. Still, talking about a clear market direction for any of these feels wrong.

Powders: bullish from the bench, but nobody wants to be too long

Powders may have traded a little lower in recent days, but yesterday evening’s jump on the CME brought buyers straight back. Seen from the sidelines, the market looks more bullish than bearish. The catch is that holding a big long position at this year’s highs feels uncomfortable. So instead of building positions, traders rush back with zero position every time prices dip a little. Most seem to be sitting on the sidelines without much stock. As soon as their customers come back with higher bids, our benched partners will have to run back onto the field in search of new inventory, because we’re sure none of them will be selling this market short. After all, once you’re on the bench, you tend to get a bit more bullish again.

Butter: flat prices, wild opinions

Butter, usually our busiest market, feels remarkably stable. The further you zoom out, the flatter the line gets. Volatile prices have made way for volatile convictions: partners swing from “we’ve hit the floor” to “the worst is yet to come” and back again. Most simply admit they don’t know what to do. There may be some room to the downside, but betting on it offers too little reward, and given butter’s history of sudden swings, too much uncertainty.

One partner has no doubts, though, and remains firmly bearish. He compares the butter market to the coin pusher at a Dutch funfair. You keep feeding in coins while big stacks of bonus coins get nudged toward the edge, and it always takes far more coins than you’d expect. But once the tipping point is reached, the whole pile comes crashing down. That’s how he sees butter today: huge stocks being slowly pushed toward the market, ready to drop and make a mess. We could not have described it better ourselves. 

Cheese: all the ingredients for a rally, except the buyers

And cheese? Gouda product is young and mozzarella is scarce for prompt delivery, with producers offering only limited volumes. On paper, that should make for a very bullish market. But there are plenty of offers for December, hardly any buying interest, and weak demand for Q1, which points to a more bearish, or at best stable, picture. The momentum is clearly upward, yet very few buyers are actively hunting for product. On top of that, more B-grade cheese is reaching the market, usually a sign that upside is limited.

Halftime

Time for the team talk, and if you’ve read our previous updates, you know our view hasn’t changed. Butter is the player running out of steam: we expect it to slide casually lower after November, maybe no drama, just a slow jog toward the corner flag. Powders remain our star striker, still bullish and set to score higher over time, even if they miss a few chances along the way. And cheese? The reliable defender. Stable, steady, not exactly exciting to watch, but you’ll miss it the moment it’s gone.

So for now, the bench stays crowded and the game stays slow. But don’t get too comfortable in that seat: when the whistle blows for the second half, everyone will want to be first back on the field, and nobody wants to be caught without their boots on. We’ll be at the touchline as always, ready to pass the ball. Give us a call before the rush starts. Halftime oranges are on us.