Changes coming to the way the SNF:BF ratio works will cost some dairy producers

Tuesday, February 5, 2013

Coping with monthly administration of the solids-not-fat/butter ratio, scheduled to start in August, will be a big adjustment for some Ontario dairy farmers. But it's not insurmountable, say the experts

by SUSAN MANN

If their management practices remain unchanged, about half of the province's dairy farmers will lose some income when Ontario switches to a new way of administering a limit on solids-not-fat production on Aug. 1, says Phil Cairns, senior policy advisor for Dairy Farmers of Ontario (DFO).

Another quarter of producers will suffer a more substantial hit, says Cairns. That's about the same number of farmers who are producing excess solids-not-fat under the current policy.

The economic loss can be averted if producers pay more attention to how their milking cows are fed, experts say, and keep the ratio of protein-and-lactose to butterfat on an even and acceptable keel throughout the year.

The province's dairy farmers are paid for as much as 2.35 kilograms of lactose and protein (solids-not-fat) for each kilogram of butterfat produced, on a cumulative dairy year basis. They are not paid for solids-not-fat produced above this ratio. Starting with the new dairy year, Ontario will administer the solids-not-fat/butterfat (SNF:BF) ratio monthly, and that means dairy farmers won't have an opportunity to recapture revenue lost in months when they're over the ratio with a refund in months when they are below.

Ontario's move to monthly administration of the SNF:BF ratio means it is falling in line with a harmonized policy developed by the provinces in the eastern milk pooling agreement. Known as the P5 provinces, they are: Ontario, Quebec, Nova Scotia, Prince Edward Island and New Brunswick.

Cairns acknowledges that coping with monthly administration will be a big adjustment for farmers. But Tom Wright, Ontario agriculture ministry dairy cattle nutritionist based at the University of Guelph, says it is not insurmountable.

Wright says managing the SNF:BF ratio gets tricky in the summer when butterfat levels in milk tend to be lower. Farmers should be thinking about effective fibre levels in feed, mitigating heat stress, ensuring cows get effective buffers to maintain rumen pH levels, and "maybe lowering the energy density of the diet."

There are different feeding approaches that will affect a farmer's butterfat test, he notes. "More effective fibre will tend to increase your butterfat test and that's a good way to adjust your ratio," he says. He also advises working closely with a nutritionist because each herd is unique.

Wright agrees with DFO's advice for farmers that they should monitor their monthly solids-not-fat ratio now to get a sense of what their level is during various times of the year.

Bill Grexton, manager of herd management services for CanWest DHI, says the ratio is determined by fat, protein and lactose and "you have to either change your fat or your protein because the lactose doesn't change."

Fat is primarily driven by fibre intake, while protein is mainly driven by protein production in the rumen. To affect the fat levels, Grexton says producers must ensure diets have enough digestible fibre, such as hay, silage, some fibre-containing grains, some byproduct feeds and brewer's grain. "Primarily, I think long fibre has a lot to do with it."

The protein level in the milk is driven by the starch and protein in feed that produce rumen bugs providing about 70 per cent of the protein. "By changing your starch level, you can change your protein levels and that affects your protein percentage" in the milk, he explains.

Milk protein levels may only vary by one or two points, but the fat might move three to five points depending on how the feeding program is changed, Grexton notes.

Farmers have a certain ratio to meet, as do provinces. Ontario is currently the only Canadian province producing over its SNF:BF ratio. For the 2011/12 dairy year, Ontario's SNF:BF ratio was 2.3050, which is 0.92 per cent over the provincial target ratio of 2.2840.

Cairns says Ontario is over its ratio because the present policy enabling farmers to balance their SNF:BF ratio over the dairy year has been ineffective.

For the 2011/12 dairy year, Ontario's solids-not-fat over-production was 2.15 million kilograms and that level would have resulted in the province having to pay a penalty of $8.9 million to the national pool. Because Quebec and other P5 provinces under-produced, that offset Ontario's over-production "and we didn't have to pay," Cairns says.

Why does all this matter? The national milk marketing system issues quota on a butterfat basis to ensure the market requirement for that component is met, according to a DFO report released at regional meetings held across Ontario last fall. Not all of the solids-not-fat that's produced is needed for dairy products, resulting in a 10 per cent "structural surplus." About half of this amount goes into animal feed at returns of less than $1 per kilogram. The more surplus that's generated, the more that is sold into animal feed and that reduces the blend price paid to all producers.

The World Trade Organization considers all of Canada's skim milk powder exports to be subsidized and, as part of that agreement, Canada can only export 10 or 11 million kilograms of skim milk powder annually, along with another 10 million kilograms of skim milk powder blends. There's an opportunity to only export about half of the structural surplus that's produced. "Anything more and we're in violation of the WTO agreement. We export all we can and then the balance goes into animal feed" for the domestic market, says Cairns.

For the last five years, Canada has exhausted its export capabilities every single year. "We export all we can and we still have to sell some into the domestic animal feed market in order to find a market for all the existing structural surplus," Cairns adds. BF