Strap yourself in, this is a Mach 1 take-off. The 'published' prices for sweet whey and skim milk are both up €50, but tales are legion for double that figure being paid by desperate buyers. Whey is up 5% and skim by half that figure.

Here's what I think is happening, broken down into bullish and bearish indicators:

Bullish:

• Low milk supply ahead of spring calving

• Lockdowns still suppressing catering cheese production and consumers buying high end cheeses for home consumption = less sweet whey Mozarella is the single largest contributor to sweet whey production, and catering demand remains on the floor across Europe.

• Hike in butter prices will reduce milk supply to cheese production

• Milk byproducts still competitive in higher animal feed protein cost base, continuing demand despite dire pork prices across Europe

• More producers playing trader games and withholding product

• Retail milk prices remain low, pressuring co-products higher

Bearish

• Chinese absent from market since mid February

• Butter prices increase €1000/tonne in one week, increasing skim milk supply as producers switch to butter production

• Physical supply has eased, so market hike is not because of lack of supply of whey or skim

• Spring calving will increase liquid milk supply

The hypothesis that this latest surge in prices was not predicted lends support to its artificial feel, suggesting that producers will have to cut and run before long. True, the bullish factors currently outweigh the bearish, but as lockdowns ease going into the spring, mass vaccinations allow embattled economies to fully reopen and we return to the new normal of consumer dairy demand and commensurate liquid milk prices increase, we could be looking at a very different milk products market by the end of Q2. Here's hoping, anyway.

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