An imbalance in processing capacity has left Manitoba dairy farmers unable to fully use the province’s quota allocation.
Speaking at a recent producer meeting in Steinbach, Dairy Farmers of Manitoba chairman David Wiens said the organization is working with processors and creating a new class of milk designed to increase investment in the province, while also dealing with non-fat milk solids generated by an increased demand for butterfat.
“Manitoba cannot accept status quo any longer,” said Wiens. “There has to be a significant change, this is not about getting into another political dogfight, this is about the fact that producers in Manitoba are currently under issue by five per cent and there is no home for the milk.”
Each province is allocated a certain amount of production quota by the Canadian Dairy Commission, based on the market demand for industrial milk.
“Our problem in Manitoba is that although we receive it from the Canadian Dairy Commission, we can’t roll it forward to producers because we physically can’t get it processed anywhere,” said Wiens. “So if you can’t get it processed anywhere there is no point in producing it.”
The results have created inequity in the Canadian dairy community, he added, noting that there have been attempts to cascade milk to other, more western processors. However, increased production in Alberta and British Columbia has left no room for Manitoba milk to be processed in those locations. Attempts to cascade milk to Quebec processors was similarly thwarted.
But the absence of processing capacity doesn’t translate to an absence of market demand.
The organization’s general manager, Brent Achtemichuk, noted that Manitoba produced 927,334 litres daily in the month of January, the market, when butterfat is included, is actually 981,000 litres.
“So there is a difference there,” he told producers.
Growing consumer demand for butterfat is the driving force behind the need to process so much non-fat milk solids.
“Our quotas are based on butterfat, so the more we produce to fill the butterfat market, the more milk we have, and that is where we run into problems,” said Wiens. To solve that, Dairy Farmers of Manitoba is launching an ingredient strategy, designed to create a new ingredient class.
“This would encourage further processing investment in Canada, particularly in terms of making protein ingredients,” he said. “I expect that it will level the playing field and that it would be more balanced in terms of milk produced for butterfat and of course the resulting skim portion of the milk.”
The creation of a new milk class may also help to stymie the flow of non-milk protein products currently coming in from the United States, although that is not the strategy’s stated purpose. These protein isolates are not subject to tariffs and close to $130 million worth of them entered Canada last year.
Dairy Farmers of Ontario has already implemented this new class of milk. On April 1, “Class 6” came into effect in Ontario, providing processors in that province another option for purchasing competitively priced milk proteins.
National negotiations for a new milk class are also underway, but Manitoba hopes to implement the same ingredient strategy as Ontario this summer. Wiens said Dairy Farmers of Manitoba had been clear in stating that if national negotiations could not be resolved by March 4, Manitoba would adopt the Ontario strategy.
“We realized that we had to solve our own problems,” said Wiens.
Some producers at the Steinbach producer meeting raised the spectre of a World Trade Organization challenge for the new milk class, but Dairy Farmers of Manitoba is reasonably confident the new class will hold up to scrutiny.
“There is a risk of a challenge, yes, but many people outside of government have examined the issue and we’ve contemplated it fully,” he said. “Ultimately what we want this to do is increase the markets for our milk, so we can respond to market demands in Canada and grow the markets more than we have in the past.”