[STATUS OF THE CANADIAN MARKET
T
he change in marketing of milk
components and world prices
over the past eight months have
influenced producer returns in Canada,
says Dairy Farmers of Ontario economist
Kristin Benke. This caused the drop in
producer blend prices, she adds.
The producer blend price is based on the
amount processors pay for their utilization
of butterfat, protein and other solids based
on the milk class price for the product manufactured, Benke says. Component prices
paid to producers are the weighted average
of the dollars received for components in
each milk class on a monthly basis, adjusted
for payment policy.
The volume of milk utilized by Canadian
processors increased from 7.6 billion litres
to 8.2 billion litres in the past five years, a
growth of 6.6 per cent, Benke says. Butterfat
(BF) utilization increased 10.4 per cent over
the same period, with solids not-fat (SNF)
increasing at a lower rate of 7.4 per cent.
Canada’s supply management system is
balanced on butterfat demand and supply.
This results in excess SNF, or structural surplus, in the system due to lower demand for
SNF components relative to butterfat components, Benke says. The SNF to BF ratio
policy helps limit the production of SNF at
the farm, she adds.
In 2015, there was 93.8 million kilograms
of SNF surplus to butterfat demand. This is a
record high and structural surplus is expected
to be even higher in 2016, Benke says.
Milk protein concentrate imports have
been increasing since the Canadian International Trade Tribunal (CITT) ruling,
which opened the border to high concentrated milk proteins with no tariff. These
imports have offset the use of SNF from
milk in cheese and some yogurt over the
past five years, she says. The offset has led
to increases in structural surplus or milk
sold into Class 4(m) or animal feed at below
world prices. For example, in 2010, 5.7 per
cent of SNF was sold in Class 4(m) compared with 10.6 per cent in 2015. During
the same period, there was a small increase
in the amount of BF and SNF sold in Class
5, which are sold at world prices. In 2015,
world prices were very low for skim milk
components after record high prices in
2014, Benke says.
Ontario, and much of Canada, reached
its drying capacity limit for SNF sold into
Class 4(m) last summer, she says. The excess skim milk was disposed with no returns for producers. This, combined with
increased volume at world prices, very low
world prices and a small decrease in fluid
and industrial prices in February 2015, resulted in lower blend prices in 2015.
INGREDIENTS PROGRAM
A national ingredients program will provide
competitively priced ingredients or milk to
processors through an ingredients class,
known as Class 6 in the Ontario proposal,
Benke says. The Class 6 price will be set at
the world price.
The national ingredients program creates
an environment for investment in the manufacture of milk ingredients in Canada. The
current market conditions have reinforced
the need for this investment. Investment in
the manufacture of ingredients will position
the dairy industry to be more competitive.
It will also create a market for the structural
surplus, and will provide opportunity for
growth in the industry, says Benke.
DFC CONTINUES TO WORK WITH NEW GOVERNMENT
D
airy Farmers of Canada (DFC) has
been in contact with the new Liberal
government to discuss important issues facing the dairy industry, DFC executive
director Caroline Emond says. She provided
an update to attendees in key areas of government relations, trade and border issues.
GOVERNMENT RELATIONS
The new Liberal government, returning to
power after 10 years, has been slow to take
action on most decisions, says Emond. They
are still adjusting to governing, she adds.
“The good news is they are clearly willing
to take their time listening, so the more we
repeat our unified message the more they
will hear us sing from the same music sheet,
and the more likely it is we get action.”
DFC is in frequent contact with government
officials at all levels, Emond says. This ranges
from the DFC policy team participating in
meetings with the Canadian Food Inspection
Agency and Canadian Border Services Agency
to DFC’s government relations team meeting
with ministers, parliamentary secretaries, critics
and MPs from all major parties, she says.
TRADE
A legal scrub of the Canada European Trade
Agreement has been completed and is now
WWW.MILKPRODUCER.CA
being translated into 24 languages, Emond
says. Ratification is likely coming later in
2016 for Canada and all EU member states.
Implementation will likely start early to
mid-2017. DFC estimates the impact to be
between 1.48 per cent and 1.83 per cent of
the 2016 production.
Even though t H