Last week’s call that the market had bottomed was debunked by the headline skim milk powder index falling €100, just shy of 3%, but the sweet whey market has maintained its unchanged status for a whole month now. Supply is plentiful on all products, even the hitherto unavailable fat-filled whey and hydrolysed wheat gluten, but the headline price drop in skim milk is a little ingenious, as physical supply isn’t widely offered at the lower price.

What continues to be a concern are the protein and oils markets. The August soybean futures contract yesterday breached the recent record price posted on 24th February, and we always remember what happened that day. The contract is shortly going off the board, so that hike was exaggerated, but over the last week we have seen 150 cents up on beans (+10%), 7 cents on soya oil (+11%) and $30 on meal (+9%). Palm oil has followed, up 10% with Malaysia increasing palm exports by 10% in early August, but largest producer Indonesia has yet to reduce stocks.

My reading is that whilst anything could and probably will happen, whey processors are paying record high prices for liquid milk, and charging pretty much commensurate prices for cheese (I have used a Gouda price above for reference), so why is sweet whey cheaper now than this time last year? Equally, what are the downward pressures acting on skim milk powder that ignore the upward march in liquid milk prices, that are being further exacerbated by European drought forcing farmers to rein back on production even further?

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