12 January 2023: Overstocked

The modest losses in sweet whey and skim milk over the past week (both down €20) belie the significant oversupply of both products. An interesting exchange with a major bag manufacturer illustrates the macroeconomics of current milk powder supply and demand; retail size sack demand is down 15% globally whilst bulk bag demand has surged, indicating that processors are increasingly storing their byproduct in the demand vacuum. Whilst the situation hasn’t got quite as dire as the picture above, the prospect of both markets decreasing below the sharply increased cost of production looks distinctly possible.

Global oils and fats markets aren’t helping support milk powders, either, as while soya beans have just peaked at $15.25, the highest in six volatile months, and meal heads for $500 and the highest level on the March futures contract, soya oil and palm oil have remained largely rangebound for the last six months. Drought dogging the prospects for the Argentinian soya harvest, and unusually dry conditions in the US soya belt have coupled with commodity funds taking record long positions, confident of a significant upturn in post-Covid Chinese 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

5 January 2023: Has milk reached the top of the mountain?

New year, new direction. Farm gate prices for milk have finally started to fall back, down 2-3p/l to start with, as processors/supermarkets start to regain the upper hand they’re used to. Although skim milk and sweet whey markets have been sliding for nine months now, both are showing signs of bottoming out, as both have shed less than 1% in price over the festive fortnight, and whilst supplies remain plentiful, acid whey offers have dried up, presumably because it is too cheap to dry. Producers and traders are shouting about imminent price rises and shortages, but they would say that, wouldn’t they?

However, the UK calf milk replacer market has started to ease, with reports of price reductions the south side of £50/t for skim-based CMRs, but less on the whey-based products. One suspects that this is likely to be short lived if the skim and/or whey markets bounce, but it is in recognition of the insurance that has been built in to pricing during the volatility of 2022.

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

22 December 2022: Review of the Year

There’s very little change in milk powder markets or veg oils this week, so I’ll take a look back over the last couple of years

In the most bullish of years, it is surprising to see sweet whey finish its 24-month cycle exactly unchanged, after its trip up to €1450 during April. Skim is still in positive territory, but many of the components in blends and milk replacers are astronomically higher, and seemingly staying there for the foreseeable.

Looking at skim over 14 years, when it plunged during the 2008 financial crisis, it is now within a couple of hundred euro of average price over the period.

Sweet whey shows more of the life-cycle of a byproduct, and is now pretty much bang on the rolling average for the period.

But where do we go from here? There is more buying confidence coming back into the market, possibly signalling brakes being put on further slides, and with milk prices still riding high and the increased cost of processing, when current stocks are diminished we could easily see another bull run.

In the meantime, I wish you a very happy Christmas and a successful 2023.

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