Inside Potatoes
Futures market collapses, but rises just as quickly
Friday 21 February was a strange day for the potato futures market. The market in Leipzig has been under some pressure in recent weeks, but it seems to have bottomed out. Until, however, a so-called stop loss order came.
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Choose the subscription that suits youOn the futures market, there was a relatively large amount of trading at and around €16 this entire week and that seemed to form the bottom. With a Cash Settlement (CS) this week of €15,10 (-0,20), a further decline on the futures market does not seem necessary.
However, the April 2020 futures market fell back to €13,20 today, a decrease of €2,50. This was caused by a so-called stop-loss order, which was executed automatically. Certain trading systems in the world, which trade on the various futures markets, can trade automatically via stop loss orders.
Market pushed back for a split second
For example, if a certain price level is hit, the system will automatically execute the order. In this case it appears to have been a sell order, which took effect at the price level of €15,50. Immediately afterwards, the market was pushed back to €13,20 in a split second with 50 futures contracts, before recovering to €15,40 within a second.
On the grain futures markets or currency markets, these types of orders are not a problem, because the volumes (turnover) are large enough. But in less liquid (turnover) markets such as a potato futures market, this can have a huge impact. The futures market closed today at €15,40 with the highest turnover of the past week, namely 283.
Physical market quiet
The physical day market is characterized by a calm atmosphere. Nevertheless, the Belgian listing (Belgapom) remained unchanged, which gives the market some confidence again. There does not seem to be an increase in the potato market for the time being. Exports are quiet and, moreover, the export market is flooded with seed potatoes from the various trading houses.
Due to the large percentage of rejections, the seed potato trading companies appear to be swimming in potatoes. The larger harvest than expected in seed potatoes also ensures that there is a lot of supply. This decimates the demand for consumption potatoes for export.
Furthermore, the coronavirus seems to be causing some pessimism in the market for global sales of fries. The largest exporter of fries in the world (Belgium) indicates that it is particularly concerned about this. The demand is there, but the logistics organization is especially a challenge as containers are tied up at the wrong ports around the world.