25 March 2021: A game of two halves - and it's half time?

I feel slightly vindicated having stated last week that I thought this hike was running out of steam, as it has at least posted unchanged prices this week, on both whey and skim. The difference this time around is that it has been producers forcing the market to these giddy heights, rather than the usual middle market bandits. Lacto Production have noticed this acutely, and allude to two or three calls a day from producers enquiring whether there is buying interest at higher levels.

It’s a bit like the sausage supply to Jack Jones’ butchers shop in Dad’s Army; officially, there isn’t any whey about, but there is always some under the counter, and now increasingly below the market. That’s a sure-fire signal the whey market will fall, at least.

Before I get too excited about a slide, proteins are still stuck on a high price plateau, and any return of Chinese buying interest will catch the proverbial falling knife, but it looks well overdone as things stand at the moment.

Skim milk is a different story, though, as it is still genuinely hard to source under €2400, so this week’s unchanged market may be just a pause for breath. Having said that, skim is nearing the top of its price bracket of recent years.

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

18 March 2021: “Tops and bottoms of markets are made for fools”

(graph www.clal.it)

It’s official, sweet whey is now dearer than at any time since Peak Oil in 2007. And, more significantly is still rising faster than the four peaks, all seen in January from 2011, 2012, 2013 and 2014. Maybe it is significant this time round to note the precipitous falls immediately following those peaks, which is producer heaven and trader hell, as buyers head for the hills.

The bald facts are that sweet whey has risen 10% during March, up to €1020, now fully €200 higher so far this year. Supplies are available to those who pay up in desperation, so there is definitely not a squeeze on supply, thus confirming this is a ransom market, as with the soya market broadly plateaued and European pig prices so dire, it looks like the pips are going to squeak on whey very soon.

(graph www.clal.it)

Skim milk, on the other hand, is tracking the latter stages of the 'intervention sting' that was engineered between autumn 2018 and January 2020 (followed by another precipitous Q1 fall), and looks like achieving twin peaks, as the feed market is up €250 in 2021, to current levels of €2420. Another interesting feature affecting skim milk is that the price discount for feed grade under edible grade has shrunk from €100 to €50, suggesting feed demand is driving the market, a signal that is usually indicative that the market is overdone (although Covid has reduced demand for skim from the edible sector).

Downgrade products (edible whey and skim that have not reached specification on colour or nutrient content) and derivatives (permeate etc) are also being withheld, so classic signs of producers milking the market yet higher.

In summary, both markets look well overcooked, but as producers are still withholding freely available product, and particularly whey is pricing itself out of feed formulations, the market looks without foundation.

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

10 March 2021: Someone wake me when this is over........

Strap yourself in, this is a Mach 1 take-off. The 'published' prices for sweet whey and skim milk are both up €50, but tales are legion for double that figure being paid by desperate buyers. Whey is up 5% and skim by half that figure.

Here's what I think is happening, broken down into bullish and bearish indicators:

Bullish:

• Low milk supply ahead of spring calving

• Lockdowns still suppressing catering cheese production and consumers buying high end cheeses for home consumption = less sweet whey Mozarella is the single largest contributor to sweet whey production, and catering demand remains on the floor across Europe.

• Hike in butter prices will reduce milk supply to cheese production

• Milk byproducts still competitive in higher animal feed protein cost base, continuing demand despite dire pork prices across Europe

• More producers playing trader games and withholding product

• Retail milk prices remain low, pressuring co-products higher

Bearish

• Chinese absent from market since mid February

• Butter prices increase €1000/tonne in one week, increasing skim milk supply as producers switch to butter production

• Physical supply has eased, so market hike is not because of lack of supply of whey or skim

• Spring calving will increase liquid milk supply

The hypothesis that this latest surge in prices was not predicted lends support to its artificial feel, suggesting that producers will have to cut and run before long. True, the bullish factors currently outweigh the bearish, but as lockdowns ease going into the spring, mass vaccinations allow embattled economies to fully reopen and we return to the new normal of consumer dairy demand and commensurate liquid milk prices increase, we could be looking at a very different milk products market by the end of Q2. Here's hoping, anyway.

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