“Coming from a family with a history in global dairy trade and motivated by my father’s fascinating stories about this industry, I’ve long held a strong desire to explore it myself.” Martijn begins. However, before following in his footsteps, Martijn wanted to broaden his horizons somewhere else and started at Afas, a software company. “After four years in the software industry, it was finally the right time for me to take a step into trading. I got in touch with Van Lee through a mutual connection and never looked back since”.
Van Lee is a company with an impressive 35-year history of trading in milk powders, whey powders, and dairy derivatives. Van Lee operates at the heart of the European dairy industry, working closely with reputable producers and logistics partners. Their primary focus lies within West-Europe, and their mission is to alleviate the risk for factories, ensuring they avoid unexpected high costs. Through structured term contracts, Van Lee guarantees price stability, quantity, availability, and, of course, quality throughout the agreed period.
Harmonizing with customers
According to Martijn being in sync with their customers is vital, as they aim to provide them with a fair price from the start. Vesper’s EU Overview of Commodities, as shown in Figure 1, plays a crucial role in aligning their pricing strategies with their customers’ expectations. Martijn elaborates “More and more of our end-users are using Vesper, including those seeking specific dairy products. We can swiftly check Vesper to ensure we’re on the same page, leveraging the transparency it provides in the market.”
Initially, Martijn wondered if everyone looking at the same data would leave no room for negotiation. However, when dealing with specific products like Skimmed Milk Powder (SMP), having a common reference point for market prices eliminates the risk of setting prices too high. “Knowing we’re looking at the same figures as our customers is reassuring. This enables us to make well-informed decisions that are in sync with the present market conditions, guaranteeing our customers a fair price”, Martijn explains.
Understanding the competitive landscape is another crucial aspect of Van Lee’s trade. The dairy futures market has been on the rise for the past four or five years, attracting participants from various trading houses. These futures contracts serve as benchmarks for setting physical product prices. “The futures contracts provide us with insights into the strategies and budget constraints of other market players.”
Martijn mentions one new intriguing feature in Vesper’s pricing widgets: “the spread”. It allows them to track the difference between futures market prices and the actual physhical market prices. “By consistently monitoring these spreads, we gain insights into the trading strategies used by our competitors. Recognising patterns in these spreads, such as a sudden reduction from 50 euros to 10 euros, can signal shifts in market dynamics, prompting us to investigate and make informed predictions about future developments.” Below an illustration displaying the difference between the EU SMP price as reported by the Vesper Price Index and the SMP futures price on the EEX. In the last six months, the price difference fluctuated within a range of 100 euros per metric ton, except the months of June and July.
Figure 1: Price comparison widget displaying the spread between the EU SMP price as reported by the Vesper Price Index and the SMP futures price on the EEX
Forecasting market trends
Apart from analyzing futures, which aid Martijn in formulating competitive product pricing strategies, he utilizes Vesper to shape his market vision. As traders they need to anticipate the market’s direction in order to make decisions that will lead to profitable trades. “Vesper’s dashboard provides a wealth of information, including details about milk supply in countries like the Netherlands, France, and Germany, inventory levels, export and import volumes, and more. It’s a valuable resource for forming our own trade strategies, particularly for powdered dairy products.”
Additionally, Vesper’s Milk Valorization widget helps Van Lee estimate commodity costs based on current milk prices. “Vesper’s calculations assist us in predicting production levels and market dynamics. We also keep a close eye on market outlooks and sentiments, especially when determining whether the market is trending upward or downward. And finally, when I have some downtime, Vesper’s news section, powered by AI, offers us specific insights about key players in the industry, such as Lakeland and Fonterra.”
All in all, Vesper has become an invaluable companion in Martijn’s journey, helping him navigate through the complexities of pricing, competition, and market dynamics.