23 June 2022: Inexplicable market

Perhaps you should sit down to receive this, and I still can’t quite believe I’m writing it, but sweet whey plunged just shy of 10% in one short week, and skim followed, sort of, by losing 2.5%. Whey down €120 per tonne, skim by €100, quoted on the Dutch market. So much for ploughing its own furrow, it’s disappearing down its own plughole!

Quite what’s going on, I don’t know, thus the banner headline, but here’s a few snippets of market news. Lacto Production received no fewer than four separate offers of 1,000 tonnes of downgrade (off-colour Disc C) skim milk powder, and even if it is the same lot being hawked around, it is tantamount to trader panic, having hung on to the tiger’s back too long. However, on the plus side, sweet whey is offered in France for €100 over last week’s price, so there is no cohesion in local milk powder markets, and thus this week’s offered prices only reflect market sentiment, and we’ll wait while next week to see if the collapse consolidates.

Looking elsewhere, the US and Canadian soya and corn crops had a rough week of weather, hotter even than the Saharan sirocco Europe basked/baked under, but surprisingly contra-traded down on beans and oil, with only meal holding relatively firm. But the real daddy this week is palm oil, and what a slide, off nearly 40% from the early May highs! Hopefully the graph below shows a collapse to levels last seen at the end of last summer, before silly season began. The back story that has driven this dive is the ham-fisted attempt by the Indonesian Government to rein in domestic inflation by severely limiting palm olein exports in April, possibly under the misapprehension that palm oil had gained more respectability as the replacement for sunflower oil. This caused significant stockpiling and tank space ran out, prompting an unseemly sell-off in an otherwise stable to bullish global vegoil market.

Maybe this is milk powders realigning with oilseeds, so the next week will hopefully give us more insight into whether this calms down to become a correction, or the dive continues.

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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