24 April 2020: Whey up, skim down, supply tight

An interesting phenomenon has returned to the whey market, namely sudden import demand from SE Asia, notably China, as despite a resurgence in ASF (allegedly coming from illegally transported pigs), the restocking with high progeny sows from France has impacted demand for whey. This has put the proverbial cat amongst the pigeons in terms of whey availability, and with it, supplies of permeate and lactose have also become scarce, and swiftly. Coupled with poor cheese production, caused by dryers seeking greater riches from drying milk for skim, this has caused a €40 hike in whey prices in the Netherlands this week, and that trend is likely to increase.

However, the avarice of the milk processors has met a sticky end, and it seems last week’s intimation that Intervention purchasing will be invoked by the EU has apparently come to pass. Having said that, the floor price is a smidgeon below €1700, but physical supplies available now are still in the €1900 region, with processors and greedy middle market traders reluctant to take the cold bath of a technically collapsing market. Even the paper market in the Netherlands has bounced €50 this week, to €1780.

Sterling is taking a breather today, losing a cent against both the euro and the dollar, as UK inflation dips sharply due to price slashing by clothing retailers and fuel prices sliding. This seems a little facile, as the same phenomena are acting on the global economy. But then, the twelve-year-olds in the cabinet scarcely engender optimism that the UK will emerge from COVID-19 above the line of the global drubbing.

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

15 April 2020: Opposing forces

To be honest, I thought I was losing the plot, as all the factors pointed to whey becoming short and rising, but down it continued to fall, at least on paper. However, the fundamentals have been recognised, and whey has bounced €30 this week.

Skim milk powder, on the other hand, has finally stabilised, again, on paper. The dryers are going flat out to meet demand, but the processors are holding on to their stocks and not dumping them into the void between the published market prices and the processors’ expectations. Having said that, physical supply can’t defy gravity for long, so unless there is another spoke in the wheel, skim does look likely to drop a hundred euro or so over the next weeks, however slowly.

However, the current supply situation is a conundrum, as although whey is rising because of shortage, it is more freely available than skim milk, so the spot pricing of milk replacers stays unjustifiably high. And Lacto Production are still on a rolling five-week notice for delivery, so again the mantra remains that bookings are more valuable than market sentiment.

I haven’t postulated on sterling for a while, since it collapsed to €1.05 momentarily, following the initial UK economic response to COVID-19, but we’re now back to the bottom of the post-Brexit range, a smidgeon below €1.15. No doubt the upcoming talks will produce more losses than gains.

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

9 April 2020: It all boils down to milk

Trying to guess where the actual market is going gets harder, but the factors affecting it are becoming more transparent. It all boils down to milk. The plain fact is that across the entirety of Europe, the plunge in demand for milk for catering, ready meal production and the restaurant trade spells short term ruin for the dairy industry, and the severity of that disaster depends on its length.

In the UK, Müller have announced that they require their producers to reduce milk output by 3%, and are encouraging dairy farmers to feed the excess raw milk to calves (all very natural, but haven’t they heard of Johne’s Disease?). Announcing this at the height of the spring calving season has big implications for later lactation for the cows just calved, potentially causing a milk shortage exactly when demand peaks again. Liquid milk prices across Europe are plunging, and I didn't think I would be saying this during 2020, but the Intervention price of €1698 is now the new floor in the market, as the Netherlands already reports €1750 as a paper price.

Skim milk powder in the Netherlands is down by 8.5% for edible grade and 6.5% for feed grade. The edible grade has plunged by €200 in the last week, but this is on paper, as the cheapest offer of physical feed grade material in the spot position is still above €2000. The dynamics of this price collapse have impacted on whey protein concentrate and the market reaction has been to cease production rather than joining a race to the bottom. This in turn has affected the whey price, and again we see falling paper prices well below physically available offers.

The only advice I can give in these unprecedented times is to buy load over load with delivery dates on, and I say this because I predict that the unprecedented demand levels we have witnessed in the last month will subside, especially on the calf milk replacers, orders will be postponed, and only then will the market find its new level. Possession is nine tenths of the law, as they say.

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