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1 July 2022: Supply and Demand change places

The old adage may be that those who can, trade, and those who can’t, write books about trading, but the current situation differs from the facile scenarios above, as demand is plummeting while supply rockets, and prices slump as quantity surges. Blending plants stand largely idle whilst buyers defer buying decisions for anything other than spot necessities. What is unprecedented during recent times is the steepness of the decline, particularly in sweet whey.

Headline numbers are that sweet whey had another collapse, down another 7% (-€80), now down €400 from the late April highs of €1440. Skim had another more modest decrease, down 1.3% (-€50), having now shed over €300 from the €4100 highs. What’s interesting is that both palm oil and soya oil have shed similar percentages to sweet whey over the same period, so there is definitely connectivity there, and the root of that is probably global food inflation really starting to bite demand. Better weather in the US has weakened soybeans and soy oil, but meal has hiked.

It is probably sensible to tease apart the two strands and look at the specifics acting on whey and skim milk. Speaking generally, whey is a byproduct and skim milk a primary product, although both have higher value demand from edible markets.

Sweet whey availability is a constant, varying annually according to production peaks and troughs, for example the late summer/early autumn Christmas cheese campaign. Beyond that, the market is manipulated by producers and traders alike, withholding material to hike the market, and dumping when the commensurate slide starts. Two Christmases came at once for sellers at the end of 2020, and the monumental rise caused by the industrial scale withholding of material began. That only broke at the beginning of April this year, as the edible market responded to inflationary pressures, and you don’t need any lectures about pressures facing the global pig industry.

What is interesting is to look back at the last time the lunatics took over the asylum, Peak Oil in 2007, and the commensurate crash. What’s different this time is that the lunatics are politicians, and geopolitics are fundamental in food pricing, arguably for the first time since WW2.

Skim milk, on the other hand, is primarily linked to the cost and supply of milk. Whilst whey production is a constant, processors extract their margin principally from the sale of cheese, and trouser whatever they can from the byproduct. Spraying towers need the numbers to add up before processing liquid milk, and with a global reduction in liquid milk supply, and the highest prices since the old king died, it isn’t surprising to see much stronger fundamentals acting on skim milk pricing. Yes, there is magically more supply available now the market has broken, but no whiff of panic that we see in the whey market.

In summary, sellers remain convinced the market will turn north soon, buyers the opposite, but the best crystal ball to invest in would predict favourable US/Canadian rainfall and an increase of grain/oilseed shipments from the Black Sea, albeit only at the moment to ‘friendly countries’.

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


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