6 October 2022: Down, down, deeper and down

Readers of a certain vintage will remember the No.1 hit by marmite band Status Quo (I loved them!), but that where it looks like the milk powders market is heading.

Sweet whey shed another 2% this week (-€20 to €940), and skim milk a further €40 (-1.10%), as warehouses fill up and the whites of producers eyes start to show. Carrying on last week's commentary theme, relatively poor demand has overcome producers and middle market traders attempts to claim poor supply would hold prices up at untenable levels. This of course started in the spring, with the wilful withholding of material to wrench the market higher, but apparently warehouse stocks across Europe have become burdensome, so we are most likely looking at a slide of some magnitude.

I'm not sure where the economic barrier is before towers cease to dry skim milk powder, but sweet whey hits rock bottom at €750, so we're less than €200 from the theoretical bottom. The summer-long reduction in liquid milk supply certainly helped keep skim milk powder high for so long but this has stifled demand to the degree that it has brought the market to the brink of collapse.

A recovered pound has also brought some relief to last week's dire sterling prices, but the international markets are still nervous as the civil war in the Cabinet and the wider parliamentary party rages on.

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

29 September 2022: Markets diverging, again

The last week has seen sweet whey fall €20, which is a significant 2%, but skim milk powder rise €10, a paltry quarter point higher. At least, that’s the headline Dutch market, as out in the wilds of Brittany offers are broadly unchanged and reasonably available, with the exception of fat-filled product, which is inexplicably firmer (probably controlled by far too few producers …)

Milk powders remain overpriced against the connected basket of commodities, as soya has had a bearish week on the back of improved weather for the US and Canadian harvest, plus a colossal crop forecast for South America. Palm oil has fallen 500 ringitts on the back of market visionary Dorab Mistry’s prediction that Malaysian palm oil will plunge to MYR2500 from today’s 3200, but bear in mind the twin peaks of March and May this year saw MYR7000 breached, so it is already a phenomenal fall.

I can’t see milk powders holding out as a special case to remain insulated from the macroeconomic marketplace that views global recession trumping reduced supply, and all price indexes are falling back.

Except the poor old pound. I have been a surprise winner in the turmoil, not because I run a hedge fund that shorted the pound, but because the pocketful of Albanian Lek I brought back from my holidays is worth considerably more than I paid for them.

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 September 2022: When supply and demand both decline ...

Sweet whey posted unchanged levels this week, but skim milk broke ranks and rose €30 (+0.8%). These cumulative rises over the last month have seen whey powder up €80 to €980, so nearly 10% higher, and skim trailing at only €150 up to €3580, so about 4% higher. Whilst the vindication of my early August call is valid, the magnitude has been less than expected, and is of course being manipulated by outside markets, and the global battle between reduction in supply and reducing demand.

Looking around at the outlying markets, it has been a generally supportive week, as the Ukraine grain export deal is in peril, and the third cycle of La Nina in South America has been exacerbated by USDA plunging its soya forecast by 3%. The biggest affect has been on soya meal, up $30, leaving beans and soy oil broadly unchanged. Palm oil is interesting, as Malaysia reported a mighty 30% increase in exports, stimulated by generous duty relaxation, but this has been equalled by mega stocks in Indonesia, leaving the market net unchanged.

The biggest current worry in our markets is of course currency, with interest rate wars playing out between the safe-haven dollar and the euro, with the poor old pound losing out both ways, as the vast majority of economists point the finger at the questionable wisdom of Brexit. Today's widely expected 0.75% hike in UK interest rates seems sadly already priced in, so unless an economy-crushing hike above that is imposed, imminent strengthening in sterling looks improbable.

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