By Jeremy Simes
Canadian dairy farmers say they are reducing milk production after experiencing low demand and supply chain issues.
The milk reductions will vary by province, but farmers hope they will be able to increase production smoothly when the economy begins to slowly restart, said David Wiens, vice-president of the Dairy Farmers of Canada.
“I think, at this point, a lot of farmers are looking to reduce production for the near term, but they will also try to keep that possibility of increasing production within a number of months’ time,” he said.
The reductions stem from the COVID-19 pandemic, and are a result of numerous factors, including low demand from the food service sector.
As well, processors haven’t been able to easily shift their production to meet the new demands from retail.
Buying patterns at supermarkets, as well as limits on dairy product purchases, have also impacted the system.
The issue caused farmers to dump raw milk in early April. With the decreases in production, however, farmers anticipate milk will no longer be discarded.
“Once we no longer have that surplus milk in the system, we won’t have to discard raw milk,” Wiens said. “We would then be at the right production level.”
To reduce supply, Wiens said farmers have a number of options.
He said they can adjust cows’ diets or rations at a level that maintains their health but causes them to produce less.
Farmers may have to cull some animals and do it earlier than anticipated, he said. The cows could be sold to other dairies, he added, but the market isn’t strong.
Another strategy, he said, is cows could be dried off earlier than normal. That would give them a longer rest period before their next calf.
In most provinces, Wiens said milk boards have told farmers not to produce more than their daily entitlement. Usually, farmers can produce slightly more than their quota because other farmers don’t produce at maximum capacity. The change eliminates that option.
He said quota has been reduced in Alberta and Nova Scotia, but farmers have been given a bit more flexibility. They can use credits to fulfil production shortfalls from other producers.
“The same goal is in mind, in that we don’t discard milk,” he said.
The provincial dairy boards are working with the Canadian Dairy Commission to see whether it can increase storage amounts for products, like butter or cheese. The supply could be used when demand increases, Wiens said.
Farmers’ revenue will be affected. They receive less income when they produce less. They also don’t get paid for the milk that is dumped, he said.
“Our farmers are sharing the cost of that milk because we are all reducing supply. It will all cost us a little bit, rather than a few farmers going out of business,” he said.
“That’s why it’s unsustainable to keep producing milk at these volumes. It is very costly and we can’t afford it.”
Feed costs have increased, which will bite into profit margins. Wiens said idled ethanol plants have reduced the supply of dried distillers grains, which means higher DDG prices.
Milk boards will assess the situation to see whether supply should be further reduced. Everything so far has been difficult to predict, Wiens said.
“Lives have been turned upside down, but we’ll continue to be there,” he said. “We look forward to the days when we can open up and when there are a normal set of circumstances.”