1 August 2019: Skim milk is in too few hands and whey is the opposite

Having been on a road trip with Sylvain these past two days, we have talked much on the likely future of the milk powder market, discussing scenarios and constructs, but neither of us subscribes to any particular one. The dichotomy is that skim milk is in too few hands and whey is the opposite, which partially explains the huge gulf between their respective values at the moment.

The illiquidity in the skim market is illustrated by the paper market reporting €30 and €40 increases in Germany this week, presumably for tiny traded volumes, whilst if you twist a supplier's arm, unchanged values are still possible, but there is no evidence whatsoever of any trader breaking the price. Whey, on the other hand, is at the mercy of traders wanting arbitrage in the market, and short selling to whoever will buy, whilst posting lower bids to producers. It hasn't worked yet, but local differences are appearing, in that the Netherlands posted a €10 drop in whey, but Germany posted a €30 increase.

So picking the bones out of that, I'd say we could see more out of whey, unless of course the short-sold traders get their fingers burnt and the German rally continues.

However, a few bob out of commodity prices is dwarfed by the slide in sterling. I don't know what the money markets were smoking last week when Boris went to the palace, but the honeymoon was over by the end of the week and the marriage is on the rocks already, with exchange to match. Stories of plucky Brexit Brits getting 88 euro cents for their beloved pound on the Costa Del Wherever abounded, but what has surprised me, driving round these past four days, is how may European number plates are on UK roads, as Blighty is now a cheaper holiday destination than Croatia.

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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