27 October 2022: On predicting markets

I’ll fulminate in the following paragraphs on the science of predicting future prices from those past, and stick to the last week’s facts. The big news is that skim milk powder has bombed out getting on for 5% in the last week, now 13% off recent highs. But sweet whey has seemingly bottomed out, unchanged at €890 on the Dutch market. Skim milk fell even more dramatically in outlying markets, as stores continue at capacity and buying demand remains hand-to-mouth.

Milk powders continue to follow their own path, as vegetable oils head the other way. Soya beans and meal have stayed pretty static over the last week, but bean oil has risen an eye-watering 20% since the beginning of this month, from 61 cents to 73. Even its poor relation palm oil has jumped 30% in lockstep during October, as fears of monsoon disruption to the main production season gain more traction than rather poor export figures. It is the worsening Black Sea crisis that lies behind this vegoil hike though, as Ukraine is critical in global sunflower oil supply.

So where are milk powders heading? Arguably, sweet whey could already be at point U on the fibonacci graph above, as it approaches the base line of production cost alone, but anyone in farming is used to long periods of producing with negative margins, so we may see whey go below the line, before the predictably savage increase as towers switch the skim. But where is skim on the graph, point S or L? It’s anyone’s call, but mine is unsurprisingly that it has potential to fall maybe another 10% before it’s caught in the safety net of connected commodities rising.

Oh, and it’s not a fibonacci sequence; it’s a schematic for designing ski jumps.

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

20 October 2022: Down the slide

Although there's some bad news burying going on this tumultuous week, there's good news for milk powder buyers. Quite how far down the slide skim and whey are is anyone's guess, but the whopping 5% drop in skim milk (-€180) suggests it's still falling at 120'/sec/sec, as stores fail to empty and demand falls well short of supply. Sweet whey has been shy to follow, down over 3% to €890, eased by the same dearth of demand as buyers do what buyers do.

Interestingly, milk powders are contra-trading to the veg oils market, as soya and palm oil have had a busy week after Russian drones hit sunflower oil tanks in Mykolaiv, scuppering the export plans out of the Black Sea that are helping world grain markets down. Wheat has been further dampened by the Ukrainian harvest coming into already bursting export silos, as talks about talks for export guarantees rumble on. Soya beans and meal have had an even week, but palm oil is back above 4000MYR, levels last seen in late August, despite burdensome stocks.

Currency is reacting to the resignation with complete ambivalence so far, so prepared are the markets for what became the inevitable.

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

14 October 2022: Free Fall

Milk powder markets have really decoupled from the protein/oil complex in the last fortnight, with both skim milk and sweet whey shedding 2%. Individually, the difference is stark, as whey only lost €20 but skim a whopping €70, but their relative values explain this. Sweet whey is now only €100 or so off breakeven at €920, but skim milk producers are paying the price for way overblowing values in Q1, as the €70 drop hides the desperation of producers, and similarly our friends the middle market traders, who are running out of space to store the powder mountain they withheld last winter.

Regarding background markets, soybeans and soya meal have bounced, 50 cents and €20 respectively, buoyed by potential Chinese demand and still disastrously low water levels in the Mississippi, hampering barging downriver. Soya oil has remained muted, but palm oil has jumped surprisingly, helped by a weak Ringitt offsetting more than ample stocks. But milk powders are following their own downward trajectory, and not seemingly connected to the soft commodity complex.

I shudder to comment on currency, as things are moving so fast, anything one writes is history pretty much immediately. Sterling has bounced majestically overnight, as the expectation seems to be that the Chancellor will be thrown under the bus, but is counterintuitive, as political instability usually trashes sterling strength.

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