The Chicago Mercantile Exchange (CME) offers one of the largest exchange of futureson its market and is very powerful for the commodities market in the world. The commoditiesare very volatile, because the commodities market is a short-term market. The CME tradesmainly futures securities. A futures contract is a financial security where the buyer and theseller reach an agreement and set the end date and the price that will be obtained on that enddate. The futures securities have an underlying asset. The aim of the futures is to enhance theprice of one asset in the future.The graph shows the fluctuationof the price concerning thefutures Milk III in the CME.Since August 2017, the futuresprices have decreased before itincreased until November 2017.That is why some investors hadplanned an increase of theEuropean production incomparison with the previousyears. The second decrease isthat the European countries had aprice butter below the U.S. price20of butter, therefore they were able to export at cheaper prices, for example to China.The second graph shows theprice of the Futures Milk III in2018. Investors are veryconcerned about the situationof the milk in the short-term.The investors can be thecompany of the bulge bracket,broker-dealer or producers ofmilk. Currently, from afinancial point of view, thesituation of the milk is not very good because the market makers have several questions aboutthe market environment, especially with the situation in Europe. However, they believe in aslight improvement in April 2018 with Easter season.Concerning the butter price in theU.S., investors have been veryconfident about its increase forseveral years. The American markethas a strong internal demand forbutter from the companies likeMcDonald’s or the households. Eventhough the milk price decreases inthe U.S., the producers know thatthey could sell at a good price thanksto the demand of butter.In 2015 Euronext, the main exchange market in the Euro Zone, has launched a newfutures, which is underlying of the dry milk, the butter and the whey powder. Its name is”Unsalted Lactic Butter Futures”. The Common Agricultural Policy has been dismantled, thusproducers and suppliers are subjected to the price on the market. Unfortunately, in France as wesaid previously the producers cannot decide on their selling price. The French butter market isin a bad situation. Some butter producers and distributors prefer to reduce their costs to be ableto cope financially if the situation continues. The Paysan Breton brand predicts a strong marketincrease, which is the reason why it decided to invest in its production of butter with themodernization of its equipment to increase its production by 10%.The structure of the French butter market and the European one is old next to the U.S.model. The French trade balance has a deficit (164 000 tons imported, 76 000 tons exported).The situation is extraordinarily surprising because France is the first consumer of butter in theworld. France needs to use the butter as a figurehead to boost its market.21ConclusionAs managers who want to enter in the butter industry, it is very important for us tounderstand the background of the French economy and of the butter business, especially sincethe recent shortage. Having a global overview is mandatory before making a decision. Here arethe main key points that are essential before making our decision.The French economy is currently stable, and would probably increase in the next years.The projections made on the French GDP are quite interesting. The amount of privateinvestment and the inflation rate seem to be the only drawbacks of the macro-economicoutlook. Despite those figures, France has to be considered as a stable economy and as apotential interesting place for us to enter.What about this industry in France? The butter industry is a domain where a lot ofuncertainty remains. Butter is a product that has a very large number of regular consumers onthe market. The demand remains high throughout the years. We could consider the demand asstable.There is more uncertainty for the offer from the suppliers. The global production and theFrench production of butter have known a major drop during the year 2017. This decrease ofthe production has caused a shortage of butter in France. In our report, we set five main reasonsfor this drop:• A decrease of the French butter production• A growing worldwide demand• A price war between big firms in the market• The importance of cheese in the French consumer habits• The speculation of consumers that wanted to anticipate the shortageThis national supply issue in supermarkets reveals the tensions in regard to businessrelationships between French butter distributors, producers and suppliers. The market iscomplex and this is due to the high number of actors in the selling process, from the rawmaterials to the consumers. The fact that the production of butter has a lot of intermediariesmakes it difficult to enter the market.The power of the suppliers is very high and the rivalry is strong too in the butter market.The most competitive firms are big industrial companies that are very powerful. Creating ourown process of manufacturing would be long and costly.For all these reasons, we do not see a lot of future in the butter industry, as managersthat are currently outside of the business. The forecasts of the butter market are not very good,and the rivalry of the market is very high, with powerful big brands that have a lot of marketshares.We saw that the domestic market is not interesting enough for us, but at the same time, butterhas known a worldwide increase, like in China, where French butter is very appreciated. Maybeit could be a solution to interest ourselves in a market outside of France.

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