15 January 2020: Skim unchanged, whey up

To kick off the new year, it’s worth having a look at the price history of whey and skim. The graphs below are from CLAL, to whom I am indebted. The whey graph goes back to Peak Oil, when everything was insanely priced, then whey economically crashes for 18 months (like many of us did). Taking that lunacy out of the reckoning, we can see peak whey is €1000 and whey is uneconomic to produce at €500, and here we are in 2020 bang on half way at €750. This is remarkably good performance considering the bottom fell out of demand with the arrival of ASF, but much of the recent rise is owed to the stellar rise in skim milk powder. Now the skim market appears to have peaked, it should dampen further rises in whey, but it may take some time before the middle market traders start profit-taking. However, the Dutch market is up €30 on last week, with scant evidence why.

The skim milk graph only goes back to the trough of the depression, but neatly shows how high it got before breaking in early 2014, from whence it slipped below the intervention trigger level, and EU stocks built rapidly (and it is that same out-of-date material that has been re-packed and sold to North and mid Africa, and Cuba in Q4 2019). This coincided with atrociously low liquid milk prices, but the recovery of both markets through 2016 and 2017 saw skim recover to close to €2000. The decline that triggered the second wave of intervention buying kicked off in early 2018. The intervention sting happened in Q3 2018, and everyone knows the rest. Has demand been stifled by the current price? Yes, to some degree, as liquid milk prices have fallen and equally demand for high SMP-content calf milk replacers. But, if the stories that the 180,000 tonnes of intervention stock has been exhausted, one could argue to the market is broadly in balance, so neither a decline or further rise is unlikely. It is probable that as several whey driers have switched to better margins from skim milk, whey could continue to rise, while SMP remains stable, perhaps falling back slightly.

Sterling has lost its post-election shine as the reality of the unworkable election promises of the Tory Party weigh on the economy, but diversionary stories about Prince Harry and Big Ben Bongs suggest Borisconi has adopted Caesar’s maxim ‘Bread and Circuses’ for keeping the proletariat quiet.

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


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