26 May 2022: Psst, wanna buy some milk?

The headline news this week is that European milk production is down 1.6% over the last month, when traditionally it should be heading north. Unsurprisingly, it has caused a divergence between sweet whey and skim milk.

The Dutch market, the hub of the European market shows whey losing €20 (-1.5%) but skim milk reversing the slide, up €50 (+1.3%). On the face of it, that isn’t surprising, as the cheese market, particularly mozzarella, is winning market share, which equals more whey and less skim. But the world is upside down at the moment anyway, and the fact that the cream price is currently higher than the price for butter bears that out, so traditional metrics aren’t reliable.

One other noteworthy comment I picked up is that the skim price in France has fallen considerably in the last days, with pretty much zero buyer demand, but in Holland and particularly Germany, it’s either traders or genuine buyer demand that has reversed the slide in skim milk prices. And the price difference is far larger than the haulage differential between western France and Benelux, so I can’t see the French slide sustaining.

Looking at the the wider markets, the news that the Indonesian Government has eased the palm olein export ban (whilst pegging domestic price and tonnage) was met with an increase in palm oil prices globally, and that in the face of ideal cropping conditions. The soya complex has seen beans as pretty much neutral, with meal up $20 and oil dipping below 80 cents for the first time in a month.

We may see whey slide some more, but I suspect our friends the traders will helpfully support the processors struggling with less milk supply by hiking the market 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

19 May 2022: Who's right?

There are definitely two camps at the moment, the producers/traders and the consumers. Here's what the producers reckon:

1. China ending lockdown in June will explode import demand for sweet whey and skim milk

2. Europe has been drier than the Nullabor Plain for months, milk production is very low

3. Demand remains high (?)

4. The largest producer in France is selling lots to the middle market

I won't bother to list the buyers' repudiation of each of the above points.

The plain facts are that both whey and skim dumped 3% of value in the last week, which is unusual in that for the second week running it is effectively in free fall, when markets usually rise fast and decline more slowly. What is worrying is that the rest of the related commodity basket had a quiet week, palm oil has dropped back to 60KMYR on the basis of 'burdensome stock inventory'. This is based on April figures before the Indonesian export ban was enacted, so we will probably see significantly larger exports in May, so the market will probably bounce by month-end.

So, if we think the milk powder market was plain overdone, this is a rapid correction, but as global grains have been raging, this bullish cycle hasn't burnt out yet and the moment volume demand kicks into the milk powder markets, we'll be off to the races upwards 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

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