Happy new year to all, however weird this one is already turning out to be. I’ll confine my comments to the milk powder market and currency exchange rates acting thereon.

Whey powder is in the grip of a supply:demand imbalance that is getting worse, as predicted. Heavy demand remains from SE Asia, overlaid on brisk buying within Europe. Cold weather has suppressed milk production, which is exacerbating the squeeze. Taking the long view, the last two years saw the whey market break by February, and the fourteen year graph attached shows whey about mid-range. What is lacking from the fundamentals that drive whey prices are the co-products of lactose and whey protein concentrate; usually, when whey gets overpriced, lactose or demineralised whey feature, and pull whey lower, but these derivatives have been revalued because of Chinese demand and so do not act on the whey complex as they used to. When whey goes down, the gap between SWP and skim milk dictates when the dryers switch to drying milk. I think this year it will possibly take until March for whey stocks to recover in line with demand before there’s much chance of a decline in prices.

Skim milk is higher, although there aren’t the same low stock issues as with sweet whey. Slow milk production is the fundamental reason for the rise, although the market may well come lower before whey decreases.

Sterling has continued to surprise by effectively doing nothing. As the world and their grandma knew there would be a deal, massive profit-taking limited the Pound’s bounce to two euro cents in the wake of the Christmas Eve deal, and last night’s riot in the Capitol even strengthened the dollar. It’s a strange world.

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