Posted: 01.06.2011

Thursday may have looked like a down day for commodities - until you looked at the cash butter transactions!

Thursday, double A butter in Chicago closed twenty cents a pound higher in one day.  Definitely a move that caught the markets attention.

In an interview with Pam Jahnke as the market data was rolling in, market analyst, Naomi Blohm of the Stewart Peterson group in West Bend - said it was caused when one company accelerated their business plan.  "Our connections on the floor said that one company came into the butter pit with the goal of getting all it's business done in a day."  That company didn't finish until the butter market had rallied a full twenty cents to close at $1.95 per pound.

"There are two strategies that traders are talking about today,"  Blohm explained to Jahnke.  "First, that the escalated prices for butter we're seeing at the retail level right now (around $4 per pound) are completely unconnected to today's trade.  The high prices that grocery stores are charging now trace back to expensive butter purchased months ago that the middle men are moving through the retailers now until the expensive inventory is gone."

"The other strategy,"  Blohm continued, "Is that the Chicago butter market right now is extremely undervalued - and in need of correction.  This company decided to capitalize on todays market and fill their needs all at once.  When they did that - all the other business dried up.  That's why we ended where we did."

Blohm also predicts more sharp spikes in butter because of Thursday's trade.  According to Blohm's charts - she wouldn't be surprised to see the butter market in Chicago make more big moves to the upside - perhaps by another 5-50 cents.

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