Each year the volatility in the dairy markets seems to increase. Market participants need to be aware of more aspects of the market that have significant influences. One of the large influences this year is bird flu and the impact it has had and will have on milk production and cow numbers. The shortage of replacement heifers and high beef prices will have a substantial impact. Increased tariffs under the Trump administration may impact international demand. This list can be added to as the year progresses. The uncertainty of traders can enhance volatility as they trade on a short-term basis, which is termed as scalping the market for a quick profit if one develops. This reduces the buy-and-hold action of a market that is trending.
Volatility in futures is one thing but volatility in the spot market is another. The recent price movements in the block cheese price have been unprecedented. We have seen substantial moves in either direction that have resulted in substantial movements in milk futures. However, the daily price swings seen recently have been incredible. This has not resulted in much price change over time, but it has been a sight to behold. The volatility of this magnitude in the futures market is difficult to predict, but volatility in the spot market makes it impossible to predict. This can increase volatility as some traders step back waiting for the market to settle down. Fewer market participants allow for increased volatility.
By Robin Schmahl
January 21, 2025
コメント