29 April 2020: Equal and opposing forces

For strange reasons of little or no activity in milk powders, and equal and opposing forces of optimism and pessimism, the market is unchanged this week.

Taking whey powder first, the shortage in physical supply still exists, but with lockdowns across Europe showing signs of gradual easing, cheese production for the restaurant and catering trades should resume soon (one example I heard this week was a mozzarella producer freezing their product in anticipation of pizzerias reopening ere long).

Skim milk powder is still in two worlds, the paper and physical markets. In a seismic shift in EU thinking, it seems the intervention system is being circumvented by Brussels paying producers to put un-marketed skim into private storage rather than dump it on the taxpayer, and whilst I'm not aware how this will work, the rumour has supported prices. The paper market still has skim at €1770, but in the real world of middle market traders with burnt fingers, there is little appetite to sell below €1900 to consumers who need spot material. It's not that the processors are paying top dollar for liquid milk, there are tales of swingeing price cuts all over Europe, and certainly French farmers will no doubt be striking in reaction to the relatively small price cut of 5 cents/litre allegedly imposed by Lactalis this week.

Taking all the above into account, appallingly low dairy farm incomes for some time, plus a return to normal supply on whey, prices for milk powders look set to be rangebound for the remains of Q2.

Now the Boris Bounce includes his baby, we see sterling luxuriating in a half cent recovery. However, if he takes paternity leave and relies on his lightweight acolytes to keep trying to run the country, I can't see that optimism lasting.

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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