Ontario dairy industry's skim milk surplus nears crisis

Wednesday, March 23, 2016

by SUSAN MANN

Ontario dairy farmers paid about $2 a hectolitre during the last six months of 2015 for its marketing board to jettison 31 million litres of skim milk, an unwanted yet inevitable byproduct of an industry aimed at meeting butterfat demand.

The surplus exists because Ontario and Canada lack adequate skim milk processing facilities to handle the skim milk associated with butter manufacturing, and the situation is reaching a crisis point, indicate various reports where the numbers were detailed and Dairy Farmers of Ontario spokespeople.

The reports have been released as part of Dairy Farmers of Ontario’s annual policy conference being held this week in Alliston.

Butterfat demand in Canada has been growing by about four per cent annually for the past few years due to the acknowledgement by health officials that fat in milk isn’t bad for people’s health as was once thought. People have returned to consuming milk products with fat, including higher fat milks and yogurts along with cream and butter.

“Despite the fact we have surplus skim, we still don’t have enough milk in the system to supply our market,” says Dairy Farmers board chair Ralph Dietrich.

To “maximize butter making capacity” Dairy Farmers got some processors to separate whole milk into cream and skim milk, with the cream being used to fill the butterfat demand, the reports said. The remaining fluid is “skim milk sent to animal feed (markets) in liquid form with minimal financial recovery” or it’s trucked to bio-digesters. As a last resort, some of the skim milk is chucked into on-farm manure pits. Neither of the latter options generates any cash.

The cost of skim milk disposal in Ontario for the last half of 2015 was shared among the provinces participating in the Eastern Canadian milk pooling agreement, known as the P5. They are: Ontario, Quebec, Prince Edward Island, New Brunswick and Nova Scotia.  

Peter Gould, CEO and general manager of Dairy Farmers of Ontario, says Ontario farmers paid 40 to 50 per cent of the total disposal costs of $4.42/hl or $1.4 million.

Gould doesn’t have numbers on how much skim milk went to animal feed compared to going into bio-digesters or in on-farm manure pits. The revenue of $65,557 earned from diverting the skim milk into animal feed was included in the calculations of the total costs.

For this year, the marketing board has been disposing of about two million litres of skim milk a week since Christmas, and that’s projected to continue to the end of May. However, the amount could also increase during the summer “when milk orders for fluid milk decrease,” the reports say.

The Dairy Farmers reports say skim milk disposal costs (based on dollars per hectolitre) are projected to increase this year as processors who weren’t charging a processing fee to separate the milk “are now requesting compensation.”

Gould says drying skim milk into powder is not an option for the surplus because the industry doesn’t have any more capacity.

In the meantime, Dairy Farmers officials are looking for ways to increase skim milk usage. Since the start of this year, officials had 500,000 litres of skim milk moved to liquid hog feed “as a means of increasing plant capacity and decreasing the amount of skim milk being disposed of in bio-digesters and liquid manure tanks,” the reports say.

“The more that can be done to increase skim milk use, the more likely it is that production can be increased to meet some of the growth of butterfat demand from domestically-produced milk,” the reports say.

Gould says there are limited uses for the skim milk. “I don’t want to create the impression that there’s some sort of magic bullet out there.”

Officials are working on finding ways to channel “more of the skim milk into animal feed versus being put into a manure pit,” he explains.

The lack of skim milk processing facilities and milk disposal options further compound the problem by imposing limits on how much milk can be separated.

“We’re not too far from reaching that limit either,” Gould notes.

It is projected to take processors three to four years before deciding on whether to increase skim milk processing capacity. Construction of new plants will take even longer.

“There’s a fairly long horizon before you actually have a physical plant that can receive milk,” Gould says.

Gould says Ontario farmers aren’t happy and want to ensure the board has a plan. “The plan is the ingredient strategy,” which is scheduled for implementation April 1, he says. “Its whole purpose is to take the industry from where it is now to a sustainable state and to provide for growth now and into the future.”

The meetings held this week in Alliston included a panel of representatives from the P5 quota committee answering questions. The panel considered the question of cutting milk production given that if production is too high it makes it hard to manage surplus skim milk disposal.

“The decision was to not reduce quota at this time,” Gould says. BF