18 June 2020: More sellers than buyers

I’m glad to say the milk powder market is taking a post-lockdown breather. It seems producers and traders have both been holding back material and are now releasing it into a market that is already largely covered.

Both whey and skim milk supplies are now freely offered, so prices of feed grade have dipped between €10 and €20 over the last week, Normally, this time of year sees cheesemaking going gangbusters and a shortage of SMP, but in the topsy turvy world we now witness, as Henry Ford famously opined, "history is bunk”. It seems the demand from SE Asia is now fulfilled with stock left over, so a gentle drift lower seems more likely than a collapse.

Sterling is back on life support this morning, below €1.11, after UK inflation fell to a four year low, and the spectre of negative interest rates loom larger, ahead of the BoE announcement today.

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

11 June 2020: Equal and opposing forces

The enormous forces acting on milk powders are equal and opposing, and thus it is unchanged from last week. Not often I get to say that.

Skim milk is doing very strange things, in that is quoted unchanged in the Netherlands, at €2030, but some chancers in France are asking a cool €300 extra, so I expect Dutch truckers will be barreling down the road to Rennes. It's worth mentioning that edible grade has edged €30 higher, and the premium is now nearly €200 over feed grade. However, the take-home message is that it is now freely offered, so it is a reasonable hypothesis that it has peaked in the current cycle.

The reverse might be true of whey powder, as although it has posted unchanged levels for a month now, is not freely offered. There's still a feeding frenzy in SE Asia, and Lacto have taken orders for 300 tonnes to Korea, China and Thailand in the last two days. Apparently, the root cause of the whey derivative shortage was the legislative change in China, in February, to allow whey permeate for edible use, and they've priced it out of animal feed inclusion. Given the balance of price pressures, I'd say the next move is likely to be higher, probably before Q3 starts and the autumn milk replacer demand kicks in.

Sterling remains rangebound in an unusually tight corridor between €1.12 and €1.1250, but has returned to late 2019 levels against the politically embattled dollar.

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

4 June 2020: China Syndrome anyone?

In short, SMP is up and SWP is unchanged.

Skim milk powder has jumped €100 on both feed and edible grades this week, which whilst it has a strong upward effect on prices, brings my recent theme of the real world versus imaginary prices to a close, as the market prices posted now are achievable. Stories have been circulating about the possibility of a northern European drought reducing milk production, but that’s plain facile, as one only needs to look at the graph below of SMP prices over the last decade to see that the last time we saw extremely arid spring conditions, we also saw the lowest SMP prices of the decade. It shows the recent uptick, which is 10% higher over the last month.

To be honest, I can’t see many factors to support a sustained rise in SMP. The greatest factor cited for the bull run of 2019 was Chinese demand for SMP for beef production during the collapse of their pig industry due to ASF, but recent reports have Chinese pig production up 20% since January, so that fact doesn’t support SMP. Demand from catering is only returning to ’normal’ levels, albeit slowly, so again, that is hardly bullish.

Whey continues to flatline, unchanged again this week, but there is little news to predict a collapse in the near future. Quite the reverse, if demand from South East Asia continues apace, so the next move could well be higher, certainly if the skim price escalates further. Interestingly, whey is bang half way between the highs of 2012-2014 (€1000) and the lows of 2016 (€500), so it certainly has more headroom, if one believes in predicting the future from the past.

Sterling continues to wallow with Brexit jitters against the euro, briefly topping €1.1250 on Tuesday, but is enjoying more strength against the politically embattled dollar.

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