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18 January 2022: Are the Tectonic Plates Shifting?

I struggle to find fresh superlatives each week new record price rises are recorded, but this week takes the biscuit! A whole ton on skim milk prices, up 3%, and the same percentage on whey, up €40.

The backdrop is firm on soya and palm oils, but soybeans are about even on the week, and meal has shed $40, so it is all about the oils. Palm has increased a whopping 20% since just before Christmas, squeezed by its own fundamentals.

Looking at supply, both whey and skim are physically available in the upward price vortex, but derivatives like fat-filled whey are increasingly hard to find, and wheat gluten has virtually disappeared from the market, and as it is a central pillar of 70% of milk powder blends, this is particularly worrying.

However, the accompanying demand dimension is starting to flag, as although the current production period is still sat at six weeks, new orders are drying up and order:delivery is likely to plummet soon. Why are orders tailing off? Presumably dairy farmers are scaling back on milk replacers and feeding raw milk, and there is definitely current interest in milk balancers and complementary feeds. Most farmers are trapped in fixed price supermarket/mega-dairy contracts, between 34p and 36p/litre, but complain that the feed-fuel-fertiliser costs considerably outstrip their milk cheque, and thus the reining back in milk production that ultimately puts up the milk powder price.

So what will give? Lack of moisture affecting the early S American soy harvest has underpinned the rise, low winter precipitation in the US soy belt is propping up northern hemisphere autumn soya futures and palm oil shows no sign of breaking. Looking at the mid term prospects for on farm milk prices, competition between the supermarkets for dwindling liquid milk supply is likely to increase prices to meet higher input costs, and the prices that we currently regard as overblown may become the new normal. But what happens when the real farm prices hit the supermarket shelves for meat and diary products and feed into the already alarming inflation figures is beyond prediction.

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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