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Skim milk powder surpluses rise again

A perennial problem with surplus milk powder stocks has re-emerged to plague Canada’s dairy industry.

Year-end stocks of skim milk powder are five times higher than they were for the previous year, according to the Canadian Dairy Commission.

This increase comes at a time when falling world milk prices restrict the commission’s ability to remove surpluses, said John Core, the CDC’s chairman.

Speaking at the Dairy Farmers of Manitoba annual meeting, Core said 2008 yearend stocks of skim milk powder were 27,508 tonnes, compared to 5,397 tonnes in 2007.

The total milk powder surplus produced during the 2007-08 dairy year was a record 85,400 tonnes.

The main reason for the increase was the rebuilding of butter stocks to meet increased demand, Core said.

But more butter also produces more non-fat solids, in the form of skim milk powder, for the CDC to dispose of.

The CDC is usually able to sell surplus stocks on the export market. Its sales are subsidized because the world milk price is lower than the domestic price. World Trade Organization rules limit the value of subsidy and, therefore, the volume of stocks the CDC can exported.

A year ago, world milk prices were high, thus reducing the amount of subsidy the CDC had to use and allowing more exports than usual. The commission exported 35,700 tonnes of skim milk powder in 2007-08.

But world prices are now down sharply, thus increasing the amount of subsidy the CDC needs to make exports price-competitive and reducing the volume it can export.

The timing could not be worse because the CDC now has record stocks on its hands. The commission expects to export only 24,300 tonnes of skim milk powder in 2008-09, a third less than the year before.

Domestically, the CDC sells most surplus skim-milk powder for use in livestock feed. A special committee representing the commission, dairy processors and producers will look for alternate markets for skim milk powder.

Core expressed confidence stocks will be brought under control. Despite the reduction in exports, the CDC expects a surplus of just 50,000 tonnes this year, more than 40 per cent lower than in 2008-09.

The main reason for the drop is that the commission now has adequate butter stocks and will not have to add more, he said. [email protected]

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