4 December 2019: Unchanged!

I have waited nearly a year to say this, but ………….. skim milk powder is UNCHANGED!

At least the Dutch market is posting unchanged values for this week for feed grade, but notably not for edible SMP, which is up the predictable €30 on the week. It is difficult to read the market this early, but I guess the most likely outcome will be that normal service will resume next week, and the upward march will continue. Appealing as it is that we’ve seen peak skim, I think it is likely to be a plateau at best, as the licensed bandits holding the ex-intervention stock probably won’t drop their prices until forced to by producers discounting, and they’re as happy as Larry to keep the market pumped up.

Whey, on the other hand, hasn’t heard yet, and has added another speculative €10 to its self-inflated importance, whilst supply abounds and global demand is stymied by ASF. Whilst it is unlikely to happen soon, of the two major milk powder markets, whey has more reason to fall than skim milk.

The Pound has put on a sparkling display this morning, up above €1.18 and $1.30. Matt has an amusing take in his Daily Telegraph cartoon, where the Russians are accusing Trump for interfering in their UK election ...

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

27 November 2019: Skim milk: ransom demands increase ...

The licensed bandits in Holland have certainly found the magic money tree in their intervention purchases a year ago. The linear increase continues this week, with skim up €40 week-on-week, with no sign of a breaking point. Theoretically, that is when skim-based calf milk replacers become more costly than feeding mother’s milk, and the last time this happened, arguably, was when skim plateaued in early winter 2104, when it stuck at €3300 for a whole quarter. Revenge, when it came in the second half of 2014, saw the the market nearly halve in value, and remain rangebound for three years, until it fell out of bed in the second half of 2017, dropping to the unsustainable level of €1300, triggering enormous sales into intervention, the market of last resort.

The SMP balance sheet looks dangerously weak, except for the fact that well over 100,000 tonnes is in the hands of the two Dutch traders who did the sting on the EU Commission a year ago, and they are dribbling out supply into a market that is essentially short. Milk production is low in New Zealand, and butter prices are too low, meaning that the creameries are extracting their margin from skim, and delighted to ride the coattails of this rigged market.

When will it end? History suggests in €700-800’s time, but there is no recent precedent to this rigged market. The only feel good factor is making a purchase and being quids-in in a week’s time.

Whey increased another €10 this week, which is unusual in the period of maximum cheese production, especially given the collapse in demand from the pig sector. However, the vacuum caused by skim's stratospheric rise has seen whey rise €10 shy of €100 since mid September, in a period when the fundamentals remained weak. So one really can’t expect whey prices to nosedive this side of a collapse in skim milk powder.

The Pound shrugged off some appalling negative growth figures early this week, in response to Tory gains in the polls. The markets essentially support Johnson’s reheated May deal, and with Labour and the Lib Dems retreating on Remain, sterling is likely to drift higher towards election day.

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

20 November 2019: Skim doubles in price in 18 months

There is only so much one can write about skim milk powder in this compromised market, where two long holders continue to hold it to ransom, upping their demand between €30 and €50 per week. This week they decided to only make it €40 higher, and if and when an EU Commission investigation into a) why they sold the intervention stock so cheap, and b) whether this seeming cartel is totally illegal, it will be far too late to mend the damage wrought.

Traders are trying to ratchet whey prices higher on the back of skim, but supplies are plentiful and a cartel impossible, so we may see prices drift higher, and most probably won’t see a break in the market this side of the end of Q1, so covering that period now seems a reasonable bet.

Sterling remains surprisingly stable, as the acreage of election magic money tree planting has now reached forest proportions.

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