15 August 2019: The market is quite odd at the moment ...

The market is quite odd at the moment because it is so even, but only from the buyers' perspective. Maybe it's still the tail-end of holiday season, but very few buyers are in the market, and the only action is in the spot position. Buyers believe both legs of the milk powder market will come down, but sellers know different, and while they're tempting cheeky bids on whey, they've put their line in the sand on skim and won't budge until they see higher bids, even if it takes to Christmas.

Lacto Production's view is that we'll see traded volume of skim rise by the end of the month, as the realities of autumn calving force the CMR sector into buying Q4, but that the decimation of a good part of the global pig herd could see EU whey prices down €100-plus. So I'll give Boris his due, he was right about the whey for No Deal Brexit Mars Bars. But don't shoot me if that slide doesn't come about, and 'events' (other than currency) send the whole shebang skywards.

Quite how sterling has recovered a cent against the euro on the news that Jeremy Corbyn has recommended himself as a 'caretaker Prime Minister' beggars belief, but that cheap shot is underlaid by the barely concealed squeals of anguish from No.10 that their No Deal bargaining chip is pretty well scuppered, however many soundbites the attack dogs of ERG get on tape. Barring successful proroguing, perhaps we've seen sterling bottom out?

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

8 August 2019: Book your forward sterling, skim will probably only decrease slowly

Sorry for the late posting this week, but perhaps it has served well to wait for the release of the negative UK economy figures, which have pulled the carpet out from under sterling, as threadbare as it already was (currently sitting at €1.0760/£0.926). The 0.2% negative growth figure is the worst since Q4 2012, which in turn was preceded by an astonishingly good Q3 2012 figure, the reasons for which are lost in the mists of time in my muddled mind. In other words, it's the worst figure since the aftermath of Northern Rock going belly up. Quite where the pound goes from here is down to the political manoeuvring about which side of Halloween we get an election, although I predict the EU will give the UK a Get Out Of Jail Free card to rejoin the EU after an engineered crash out of Europe.

Unusual as it is to start with our beleaguered currency (anyone for wheelbarrow futures??), the milk powder markets are at least calm. Skim is still managing to maintain unchanged status, despite a €20 hike in edible skim in Holland, with traders determined not to break the market. What is surprising is that given the USA is awash with milk with nowhere to go in Trump’s dystopian trade world, and prices for US lactose and whey have fallen out of bed, more US towers aren’t switching to skim production. Having said that, it can’t be long before the price differentials between US and European lactose and whey in SE Asia (the US being far the cheaper) translates into the US dumping in the EU. Should that happen, it will be deep into Q4 before the spot price slides, but it remains a potent threat.

So in summary, book your forward sterling, skim will probably only decrease slowly, if at all, and whey could slide, but not imminently.

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

1 August 2019: Skim milk is in too few hands and whey is the opposite

Having been on a road trip with Sylvain these past two days, we have talked much on the likely future of the milk powder market, discussing scenarios and constructs, but neither of us subscribes to any particular one. The dichotomy is that skim milk is in too few hands and whey is the opposite, which partially explains the huge gulf between their respective values at the moment.

The illiquidity in the skim market is illustrated by the paper market reporting €30 and €40 increases in Germany this week, presumably for tiny traded volumes, whilst if you twist a supplier's arm, unchanged values are still possible, but there is no evidence whatsoever of any trader breaking the price. Whey, on the other hand, is at the mercy of traders wanting arbitrage in the market, and short selling to whoever will buy, whilst posting lower bids to producers. It hasn't worked yet, but local differences are appearing, in that the Netherlands posted a €10 drop in whey, but Germany posted a €30 increase.

So picking the bones out of that, I'd say we could see more out of whey, unless of course the short-sold traders get their fingers burnt and the German rally continues.

However, a few bob out of commodity prices is dwarfed by the slide in sterling. I don't know what the money markets were smoking last week when Boris went to the palace, but the honeymoon was over by the end of the week and the marriage is on the rocks already, with exchange to match. Stories of plucky Brexit Brits getting 88 euro cents for their beloved pound on the Costa Del Wherever abounded, but what has surprised me, driving round these past four days, is how may European number plates are on UK roads, as Blighty is now a cheaper holiday destination than Croatia.

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