12 October 2023: Déjà vu, all over again

The milk powder markets continue to beggar belief, being propelled ever higher again, whilst farm gate milk price plummets and everything else in the commodities basket that milk powders are even vaguely related to. But this is the way traders love it, arbitrage, as a flat market of supply and demand equilibrium takes them out of the chain.

Looking at the graphs, it looks like we’re back on the two year cycle, with no reason to be. Skim milk put on a staggering 4%, up €100, and sweet whey nearly 3%, up €20, now at €750, compared to the lows of August of €520, so pretty much 50% higher! And there’s still stacks of stock of both product, so it has to end in tears as buyer resistance starts to kick in and stocks will become burdensome again, but this will take months and cost end-users dearly whilst it plays out.

BDC agri is the UK broker for Lacto Production milk and whey powder products.

For further information and prices, contact Greg Dunn on 01206 381521 or g.dunn@blackdiamondcommodities.com

5 October 2023: Been there, done that, got the T-shirt

So daft is what is happening in milk powders, we’ll start this week with the real world. Everything’s down. Crude oil is crashing, over 10% in a week when weak global demand stole centre stage from OPEC manipulation, the US soy crop is piling on top of Brazil’s whopper 2023 harvest and palm oil is following on down. The trend's also continuing in liquid milk, talk yesterday at the South West Dairy Show centred around the gloomy news that it has already slipped below the 30p/litre level, having topped out at 55p. Dairy farm incomes are back in the red as feed and pretty much every other input is at best unchanged, and weak sterling is the cherry on the cake.

So why are traders and processor alike in the milk powder industry biting the hand that feeds, withholding stock from sale, and ratcheting up prices again to levels we saw last year that the end market cannot afford? And most probably causing another crash and a larger stockpile than what is still allegedly sitting currently in warehouses across the continent?

Sweet whey is up over 4% to €730, now over €200 over the early August lows, whilst skim put on another €70 to rise by 3%. To be fair, one can buy any amount of whey at the headline price, but skim milk powder has done a disappearing trick, even though it is still very much in stock.

BDC agri is the UK broker for Lacto Production milk and whey powder products.

For further information and prices, contact Greg Dunn on 01206 381521 or g.dunn@blackdiamondcommodities.com

28 September 2023: 'I told you they was organized!'

Preparing for the premiere of 'Chicken Run: Dawn of the Nugget', I recently watched the hugely enjoyable original, and saw a parable for the current skim milk powder market. Something changed, in early September, up to which point any amount of skim was being thrown at any buyer who put their hand up, then suddenly the shutters went up, and the copious offers disappeared pretty much overnight.

Here’s the numbers; sweet whey rose by only €20, just shy of 3%, but skim milk powder shot up €70, a similar percentage, but the individual market dynamics are not. Looking at the other cards in the pack, whey protein concentrate is a whopping €500 below skim milk, the widest margin for a decade, and the norm is roughly parity. Gluten is nearly €400 lower than recent highs, which helps whey-based milk replacer pricing.

So a bit like the bewildered Mr Tweedy above, here’s what I think is happening. The whey rally is running out of steam, as it is freely offered at the price and physically available. Not so for skimmed milk, as the ranks of both traders and producers have silently closed, and the colossal offers in August have disappeared from the market over a period when they could not possibly have all been consumed, and are now being priced well above the headline market price if one wants quantity, which the blending industry definitely does. So demand is now radically exceeding artificially restricted supply, and the whole gravy train that caused the last crash could be starting again.

Also, I don’t trust WPC or gluten to remain underpriced; if the disparate skim market can get organised, the handful of processors for these derivatives will gleefully bung up their prices.

As irrelevant as the wider protein/oil markets are at the moment, crude oil is steaming into the mid $90s as Saudi and Russia restrict supply until year-end, and US stock inventories are surprisingly low, but veg oils haven’t followed. The US soya crop is in the worst nick in a decade, and the harvest is slightly behind schedule, but soya markets are quiet and gently lower over the week.

BDC agri is the UK broker for Lacto Production milk and whey powder products.

For further information and prices, contact Greg Dunn on 01206 381521 or g.dunn@blackdiamondcommodities.com