23 September 2020: Are we nearly there yet?

The levelling off I spoke of last week hasn’t happened yet, with whey up €20 and skim milk up €10 over the week.

Reasons cited for the hike in whey hinge on a reported reduction in cheese production, pushing up cheese prices and whey with it, as production has slowed. This hasn’t been borne out in terms of supply, as whey is freely offered with sellers happy to accept higher prices. Traditionally, this would usually presage a slide when increased Christmas cheese production kicks in, but the uncharted territory we are now in could see a reduction in cheese production, and thus sustain further rises. My feeling is that the rise won’t continue much longer, as supply seems to roughly exceed demand as things currently stand, and without a continent-wide hospitality lockdown, the balance sheet should remain stable.

Skim milk is still being driven by export demand, but the rises are levelling off, so hopefully skim will plateau soon. But a rapid slide certainly doesn’t look likely until deep into Q4 at the earliest.

Sterling continues to unimpress, as the dollar regains safe-haven status and the Eurozone struggles with dire PMI figures but still remains dominant over the pound.

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 September 2020: Whey unchanged, skim up, sterling outta sight

Probably the biggest feature this week is sterling bombing out against the euro, now Daily Express readers appear to be controlling negotiations with Michel Barnier, and the currency markets have backed who they expect to win. It’s been a quiet week on the milk powders, with whey unchanged, but skim milk still trending north.

Put simply, whey supply is broadly in balance with demand, but the shortage of derivatives such as lactose and permeate continues. Skim, on the other hand, seems to be following an incline underpinned by continuing undersupply of raw milk that won’t go back into balance until October’s autumn calving glut kicks in.

There has been large scale buying this week, which has pushed values higher by €20 (1%) and this trend could easily continue for the next month or so. It doesn’t have the feeling of a runaway train, and when it does peak, it’ll probably plateau rather than dive. The main thing that may derail that supply:demand is a return to Europe-wide lockdown as temperatures tumble to optimum Covid infection, and the second wave reduces demand dramatically from the catering sector.

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

3 September 2020: I was righter!

The market pendulum continues its upswing with growing momentum this week, with whey up €20 and skimmed milk powder a whopping €60, coincidentally both 3% higher on last week.

Looking at skim milk powder first, it looks like a return to fundamentals (at last), as the milk powder mountain sold out of Intervention in 2018 has finally disappeared (and ginormous profits trousered) and we’re back to pure supply and demand dynamics. Bull factors include a liquid milk market still in summer undersupply and autumn calving demand kicking in, but on the bearish side is the weak dollar meaning the Americans are scooping up global demand and leaving Europe technically long. Balancing those two forces suggests to me that we’ll see the September and October markets rise, but could see the market break before the more traditional year end downturn.

Whey is harder to read, but susceptible to the same influence of dollar weakness meaning the US will continue to snaffle whey business into S E Asia. That market is rebuilding fast after ASF, so the global supply v demand is supporting prices, and it wouldn’t surprise me if whey continued to rise, even if skim peaks/breaks.

The Pound is strengthening on little more than it isn’t the dollar or the euro, it seems. Maybe the Government’s 13th U-Turn will be to agree the Post Brexit trade deal?

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