Preparing for the premiere of 'Chicken Run: Dawn of the Nugget', I recently watched the hugely enjoyable original, and saw a parable for the current skim milk powder market. Something changed, in early September, up to which point any amount of skim was being thrown at any buyer who put their hand up, then suddenly the shutters went up, and the copious offers disappeared pretty much overnight.

Here’s the numbers; sweet whey rose by only €20, just shy of 3%, but skim milk powder shot up €70, a similar percentage, but the individual market dynamics are not. Looking at the other cards in the pack, whey protein concentrate is a whopping €500 below skim milk, the widest margin for a decade, and the norm is roughly parity. Gluten is nearly €400 lower than recent highs, which helps whey-based milk replacer pricing.

So a bit like the bewildered Mr Tweedy above, here’s what I think is happening. The whey rally is running out of steam, as it is freely offered at the price and physically available. Not so for skimmed milk, as the ranks of both traders and producers have silently closed, and the colossal offers in August have disappeared from the market over a period when they could not possibly have all been consumed, and are now being priced well above the headline market price if one wants quantity, which the blending industry definitely does. So demand is now radically exceeding artificially restricted supply, and the whole gravy train that caused the last crash could be starting again.

Also, I don’t trust WPC or gluten to remain underpriced; if the disparate skim market can get organised, the handful of processors for these derivatives will gleefully bung up their prices.

As irrelevant as the wider protein/oil markets are at the moment, crude oil is steaming into the mid $90s as Saudi and Russia restrict supply until year-end, and US stock inventories are surprisingly low, but veg oils haven’t followed. The US soya crop is in the worst nick in a decade, and the harvest is slightly behind schedule, but soya markets are quiet and gently lower over the week.

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