2 October 2019: Skim through the roof, whey still on the floor

Skim milk powder is really surpassing the wildest dreams of the Intervention stock long-holders, up an astonishing €70 since last week. Although we have seen prices a full €1000 higher than this no more than six years ago, it is the relative value of whey powder that suggests that SMP is well overcooked at these levels. When SMP topped out in December 2013 at €3300, sweet whey was also topping out at €1000, but today whey languishes 40% cheaper, with little support from the worldwide hog market. Given that the ex-Intervention stocks are well in excess of demand, and more milk towers are switching to skim, current SMP prices look dangerously and unsupportably high.

Lacto Production’s view is that when this market breaks, prices will likely fall hard, with the slide exacerbated by buyers standing out. But until then, the next weeks will probably see jobbing traders milk yet higher spot prices out of an exasperated consumer market. Farmers are facing lower milk prices and ever higher calf milk replacer values, so the pressure to feed liquid milk to calves becomes stronger, and demand decreases.

Whey remains steady after last week’s seemingly artificial price hike. Stocks seem plentiful with Christmas cheese production at full steam, despite traders’ claims of higher prices to come.

Sterling is trading in a narrow band, held sway by the clever money believing in the last-ditch Brexit deal, and the even-cleverer money allegedly stuffing Tory coffers full, pressuring for a no-deal exit to deliver on their short-selling of the Pound. One hopes they choke on the profits of selling the country down river, if that is their game.

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