25 November 2021: Levelling up?

There are finally some signs that the upward charge is starting to run out of steam. My take is that what started with a genuine shortage of skim milk powder back in September turned into unbridled greed and wilful withholding of material in both the skim and sweet whey markets. The shop window prices for both products showed €20 increases week-on-week, but out in the real world, suddenly physical supplies seem plentiful. Not that these are sunlit uplands, at least from the consumer’s point of view, but it looks unlikely we will see anything more favourable than a levelling off before a possible downward correction later in Q1.

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

11 November 2021: Square Book

The truce is over, for whey at least, as it is up €10-20 this week, but more significantly producers warn of more to come as their milk supply dwindles. Skim milk shoots up another 2% or €60 on the same continued precept of insufficient milk supply.

Let's look at the milk situation. I have previously posted figures suggesting a reduction of liquid milk of as much as 3%, which is pretty staggering in peak autumn milk, but I have seen figures this week suggesting anything between 6 and 10% reduction, which is almost wartime rationing level. If figures anywhere near this are the actual reduction, we are looking at a year of stock recovery time. Another scary fact is that buyers worldwide have bought into the rise like there's no tomorrow, extending product time to six weeks, so for the time being farmers do what they do, accept farming is a cyclical game and paying up.

But my reading is that this isn't cyclical; food, fuel and worldwide logistics have risen to unimagined levels, and whilst nothing's settled down yet, we ain't going back to the old world order of cheap food, $30 Brent Crude and oversupply in world shipping. Whilst farming adapts to remaining profitable in the new world order, all we people in the supply chain can do is keep as square a book as possible and supply the reducing interim demand.

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

21 October 2021: Of Black Swans & Grey Rhinos

I may have come to the party about 18 months late, but I’ve been reading up on both Black Swan and Grey Rhino theories. In other words, the current combination of the unpredictable event of COVID occurring with the (some say) slow moving and predictable danger of climate change. The common thread is that both are predictable with 20/20 hindsight, but we’re still the wrong side of the current bull charge in worldwide commodity markets to second-guess how it came about and why it peaked.

There’s no good news in milk powders this week, skim milk up €90 this week on top of €70 the week previous, and sweet whey up €30 two weeks running. The soya market is flat on beans, down on soya meal, and about 6% up on soya oil, which has pumped up palm and coconut markets again, after taking a breather through September.

Looking first at skim, the public price of €2850 is well under the real market faced by purchasing managers, and the scarcity of liquid milk is, I think, now secondary to the processors being greedy and withholding stock to force this market until the pips squeak, and we all know how that ends, with a steep decline. Blenders are now buying part-loads wherever available and the situation is pretty desperate. Quite how a slight imbalance between demand and supply of liquid milk can send the skim market back to ‘Peak Oil’ levels of 2008 is increasingly suspicious.

The tenor of the sweet whey market has changed, as previously it has been well supplied by cheese processors, but the recent uptick is cited by traders to be caused by lack of milk supply. Physical supply is still plentiful, but traders play their game.

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