12 May 2022: What goes up ...

It was a good job that it was a soft commodity that hit Sir Isaac Newton on the head, otherwise we may never have learnt this truism. And gravity certainly has acted on milk powder markets over the past week, with both whey and skim milk both shedding nigh on 3% of value. Backgrounds markets have been quiet, and profit-taking has pulled palm oil down, despite Malaysia having to take up the slack in exports caused by the Indonesian ban.

Whilst the adage that there are more sellers than buyers is currently true, spot demand has returned, and the selling stampede is headed by the greediest of the traders desperate to unload downgrade material that they hung on to for too long. The supply/demand crisis on fat filled whey and hydrolysed wheat gluten has receded slightly because of marginally improved supply met by muted demand, but with no easing in price.

Where we go from here is complicated to predict, since global warming and geopolitics have returned foodstuffs from being lowly also-rans in the commodity world to the backbone of the global economy, so it is facile to link the current slide to the slump in global share indexes etc. The grain/oilseed export facilities in Odessa having been recently destroyed has limited downward potential in grain markets, and we’re not out of the woods yet for northern hemisphere spring rainfall, so this slide may not sustain from a correction into the hoped-for buyers’ revenge.

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

6 May 2022: Edge of the precipice?

Arguably, whey powder has already gone over the edge, as it is down €40 on last week, and nigh on 8% lower from the end March highs. Offers from traders vary by as much as €240 over the week, so panicsville looks like it's setting in. It's a different story for skim milk, though, as it is resolutely unchanged this week after last week's surprise drop. Offers aren't burdensome, but are adequate to meet muted buyer demand. What's holding the market up is not only the Indonesian RBD palm olein export ban, but the more worrying ban on fat filled whey, as Indonesia accounts for 60% of world supply.

World milk powder markets are in retreat, USA is falling and the Global Dairy Trade index shows a cumulative 8.5% drop in the last fortnight. Background markets are weaker, soya beans, meal and oil all shedding circa 5%, and palm oil likewise, despite the above.

My view is that we're looking at the beginnings of a large correction at best, rather than a market collapse, as the global food balance sheet isn't long, and the poorer South American soya harvest and delayed planting in the US is unlikely to sustain the index markets' fall.

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

28 April 2022: More hat anyone?

I'm busy chomping millinery, after my denial of a price slide in last week's missal. But I honestly don't think I'll have to consume the whole sombrero, as milk powders are trading in stark contrast to the background markets of vegetable oils.

Here's the numbers; sweet whey down €60 (-4%), skim milk down €150 (-3.6%), but palm oil is back up to near early March highs of just under MYR70k and its poor relation soybean oil has charged up from 82 cents to 88 over the week, whilst beans remained static and meal dropped commensurately. Needless to say that offers of physical milk powders don't match the enormity of the published market prices, but something funny is going on, as the contra-indicators are significant.

The veg oil market was quite slow to explode after last Friday's announcement by the Indonesian Government that RBD palm olein was being withdrawn from export, in an attempt to cap domestic food inflation, but that is the foundation of this week's bull run in both palm and soya oil.

So taking that little lot into consideration, even conceding that the milk powder markets are well overdone, seeing nigh on 4% out of milk powders when veg oil has increased by 5% plus suggests possible market manipulation by traders. We all know how they hate a flat market.

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