25 January 2019

I’ll start with the good news; sterling strength. Goodness knows why, though, with Airbus saying what we’re all thinking, and more amendments being put before Parliament than hot dinners before the next vote, but presumably the clever money senses the mad dogs of No Deal aren’t barking quite as loudly. However, six cents up from the bottom does take some of the sting out of the next paragraph.

As the old song goes, the only way is up. Another €30 on sweet whey, and skim milk. Whilst the continued whey hike is perhaps understandable (now up a full €100 since mid November), the upward march in skim milk powder prices remains as inexplicable as when it started. To lift verbatim from Lacto’s weekly update - "Explanation is still shortage on SMP, 3 month ago after the low production summer we have too much and now during the production peak, there is not enough."

I’m as guilty as anyone of having personal investment in a market view, and feeling it’s ’not fair’ when the market moves the other way. Then, when the unexpected happens, one does nothing, sure in one’s conviction it will correct. The third stage is roundabout now, throwing in the towel, accepting the new normal, and second guessing where it goes from here. Looking at the charts, the whey market has risen through Q1 and Q2 for the last two years, so we could well be in for more of the same (especially considering whoever has cornered the skim market with heavy intervention purchases isn’t going to sell at a loss in a hurry), towel-throwing doesn’t look like it would lose money for the rest of Q1 and probably April and May.

Having said that, as the biggest fundamental of them all, supply, is no worse than in balance with the second fundamental, demand, profit-taking could kick in from the skim milk producers, leaving the middle market long and wrong with their intervention book.

Countering that is the fact that producers are enjoying much better returns, so why spoil a good thing?


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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