16 December 2021: No Milk Today

I have faithfully reported that the international milk powder markets have been latched to soft commodities, principally the vegetable oil markets, but now both sweet whey and skim milk are still heading skywards whilst everything except palm and coconut oil has dropped through November. The reason remains simple; feed price shoots up, milk price doesn’t, farmers worldwide rein back production, less liquid milk = higher price for milk derivatives.

Statistics still point to a suspiciously small reduction in EU milk production of 1-2%, and early season indications from New Zealand show 3% down. Skim milk has leapt another €40 week over week, and sweet whey by €20. Skim has remained more plentiful in physical supply, but has now swapped places with sweet whey, with physical prices for real deliveries having risen in one case by €110 per tonne in a single week.

Looking globally, there are signs that the resurgent Asian market is coming back to the EU for sweet whey, as the previously burdensome stocks in the US have depleted, and that market sits only 8-10% lower than the EU.

So, the traditional Q1 decline doesn’t look like an early starter next year……

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

9 December 2021: Next Slide Please ...

In an attempt worthy of a prime minister to divert attention from my inability to call a market, the graphs make below interesting, if grim, viewing. The markets have risen again this week, sweet whey up by €20 (1.7%) and skim milk by €30 (1%), but physical supply has been plentiful, normally the benchmark for a decrease.

Skim milk is perhaps the most fascinating graph, in that the trend line for 2019 and this year are almost perfectly parallel, separated by a €750 premium. The correction seen through the spring in 2020 will if anything come later in 2022, as orders are still buoyant, despite the eye-watering cost.

Whey powder has been a game of two halves between 2019 and 2021, with 2020 pretty much flatlining. What has been the common factor in both markets since August has been the undersupply of liquid milk. If it is as little as 1-2% reduction, it is staggering that the price effect has been so savage, but it is probable that the true reduction is greater than 2% combined with processors not being shy to push prices skywards through the autumn.

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

2 December 2021: Peak Skim?

I give up trying to read this market. Last week, it looked certain to be running out of steam, yet this week we are served up with a whopping €50 increase in skim milk and €30 increase in sweet whey powder. However, what is significant is the number of sellers coming out of the woodwork, and to be fair this had already started last week so it is surprising to see such large increases posted.

This certainly has the feel of a market topping out now, as we are maybe seeing the last stocks being sold off before year end. After a terrible period for the purchasing manager scratching around trying to find physical material, we are perhaps now going into the uncomfortable stage of having to buy forward on a bull market just in order to take delivery when the spot market will possibly be falling. One has to own physical material to run factories/farms despite what the spot market conditions are, when the production period is extended and middle market traders are trying to dump expensive purchases.

Here is a table showing price increases since January this year for key ingredients in milk powders, which is pretty stark.

Even if we do see a long overdue correction, it seems unlikely we will see last year’s prices unless the world economy crashes again…..

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