29 May 2019: Skim has stopped going up!

Good morning, finally, the words you have been waiting seven months to hear - skim has stopped going up. At least in the French market, as I note it was up €10 for feed grade in the Netherlands, and a whopping €30 on food grade. However, the fundamental change is that in the last week, everyone and their auntie is now offering skim, so it is freely available, the opposite situation of the intervention sting, that saw just a few loads offered weekly to an incredulous market.

This situation has given the green light to whey to follow its own fundamentals and answer the huge hole left in its balance sheet, caused by exports to Asia biting the dust. Prices down between €10 and €20 across Europe this week.

Sterling might as well be suffering from African Swine Fever, as it remains in its sick bed, watching the Dirty Dozen scrambling unedifyingly to sit atop the Tory dungheap, with a feeling of déjà vu that we’ll see October 31st become the new March 29th, new leader, same old problem….

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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 May 2019: Skim is up, whey went sideways and the pound went down

Same old, same old, again this week, I’m afraid. Skim is up, whey went sideways and the pound went down.

There are two Dutch firms who are coining it on skim milk. You have to hand it to them, they saw the price of skim was at a historic low, they had deep enough pockets to buy the intervention stock, the market of last resort, and they had the brass neck to corner the market.

Whether the howls of anguish from the politicos and the press about Brussels selling the family silver will come to anything, I doubt, unless they can prove a cartel was established, but that would be way down the road, after the mega-profits have been trousered by the traders. Let’s look at history again, whether one considers it bunk, or not.

This graph shows the trajectory of the skim market for the last three years, and this year is following nearly exactly the Q2 pattern for 2017, and that ended in tears by the end of Q3. But something tells me that because the stockholders are long and strong, we are unlikely to see a repeat of two years ago.

Whey is still responding to the equal forces of poor cheese production and lack of export demand, although I feel that it hasn’t addressed the enormity of the reduction in demand from China alone (a reduction of some 40,000t of lactose), but time will tell. But if skim is still relatively high when that demand situation turns round in the future, it will be lighting the blue touch paper time.

The pound continues to disappoint importers as much as our politicians do. Enough said.

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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 May 2019: 'It's confidential' Brussels

Not often do we see the two pillars of milk powder moving in different directions, but that's what's happened this week.

To quote Sylvain Fournier, skim milk is 'uncontrollable', up another €50 on last week (now €1880), and isn't far off three year highs now, and those peak prices date back to 2014 pretty much. However, the average price for the entirety of 2013 was €3k per tonne, so we just have to face it that a year ago, when SMP bottomed at €1300, it was too cheap.

There was a recent article in the French dairy press that contained this quote from the president of the European Milk Board:

'Brussels refuses to tell us who bought this milk powder. It's confidential.'

The 20/20 hindsight commentators (like me!) are saying that Brussels threw away €140m by setting the selling price too low. But whoever is sitting on a quarter of a million tonnes of the stuff can ride this market higher, then lower, and still be hundreds of quids in. They certainly have long pockets: it's over €300 millions' worth they've shelled out.

Regarding whey, time was when one commodity shot up whilst the other stayed unchanged, the old trading adage was to buy the latter, pronto, but that seems unpopular advice today with whey losing export demand from SE Asia. It's down €10 in France and €20 in the Netherlands, but I worry how far it can slide given the headlong rush by processors to dry milk and cash in on the traders' bonanza.

The pound remains broadly unchanged, as do the positions of everyone jostling for leverage in the Brexit debacle. Jeremy is under orders from his Kremlin handlers to deny the Labour rump demanding a people's vote, Teresa says she isn't the problem, Vince claims the council elections were a second referendum and Nigel, well, makes a lot of noise.

See also this article by Jane Byrne of Feed Navigator for a view of the likely impact of African Swine Fever on Chinese demand for whey powders.

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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