23 October 2019: China Syndrome

Skim continues its long march north, and it doesn't look like it's reached the peak of this mountain yet. China waded in for some large tonnage this week, on top of last week's Algerian and Cuban purchases, as the country rebalances its meat demand from pork to beef. Only a modest €20 up this week, but a whopping 53% higher than a year ago.

Whey is sneaking up behind, but is far more likely to break sooner, given copious supply and muted demand. It is up similarly €20, but taken over the past five weeks, it has risen €70, which looks entirely trader-driven, given the weak fundamentals.

Currency is about the only good news, as the money markets view events in Westminster more favourably than does the right wing gutter press.

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

16 October 2019: Skim exports hike market

No relief for skim milk powder, as a couple of big export orders have shunted it up yet higher. An Algerian government tender for 40,000t edible SMP was the biggest, which is a year's worth, whereas that country usually buys twice to four times a year, so a clear signal that they don't expect the market will break for some time yet. Cuba similarly bought a 17,000t slug, which has pushed feed grade SMP up a mighty €50 over last week, now a whopping €300 higher since the beginning of September. Surprisingly, given the large export orders, the edible market only rose €20 in the Netherlands over the week, the smallest rise we've seen for some weeks, so perhaps a sign the bull run is starting to stall?

Whey traders are talking a good fight, shunting the market up €15 in France and €10 in the Netherlands, but there is no perceptible squeeze in supply. Demand is still dire from Asia, Lacto Production's sales are down over 50% to the region, which is in line with the fall in demand. The US market has ranged between €200 and only €90 discount to Europe, currently at €130 lower, having shed €200 since January, but it has continued to decline, whilst Europe has bounced by €50. That fact alone suggests US exports to Europe can't be far away, and will likely hamper traders' attempts to hike the European whey marks much higher.

Sterling continues to amaze in its comeback, despite the rejection of pretty much everything by the DUP. But now the chief lemming has told his ERG flock that compromise is suddenly required, despite the purported deal being May's package reheated, business confidence indicates that something short of a no-deal plunge into the abyss will happen - even if it's a three-month extension and Boris does end it all in a ditch.

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 October 2019: Skimming the profits off butter

Cracked record time: SMP up €60 on edible and €40 on feed grade.

Looking beyond the enormous oversupply of ex-intervention stock slowly being dribbled out in a managed sting, there are other factors acting on the market. Skim production is reckoned to be 2-3% down, year-on-year, which isn’t overly bullish taken alone, but apparently butter prices have dived and producers are demanding more yield from the skim component. Also, buyers diving in has exacerbated ballooning prices. In short, none of the players on the supply side of the equation (the intervention long stock holders, milk dryers or butter producers) see any reason to tip skim milk powder into oversupply.

The whey market is certainly not unaware of its relation’s relative riches. Supply is definitely available, but producers are starting to hold back on deliveries, to edge the market higher. While it is only €10 higher in Holland this week, it is worth noting that it has risen €40 in the last month, and even in Spain, a traditionally cheaper market, we see prices on the march upwards.

Sterling weakness reflects the path the political party formerly associated with fiscal prudence is taking the country on to our new status as a banana monarchy.

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