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Canadian consumers have a demand for Butterfat over Skim Milk
April 27, 2017

The breadth of the yogurt selections in grocery stores is one indication of Canadians’ increasing appetite for butterfat. So is a change in the type of milk that shoppers now prefer.


Dairy quota has been expanded to meet those appetites with seven percent growth since Aug. 1 of this dairy year.

“We attribute it to the consumer preference for fat and cream,” said Alberta Milk chair Tom Kootstra.

“Butter sales are up and more importantly, people are drinking a higher concentrate fat fluid milk. The 3.25 (percent butterfat) is gaining market share and skim milk is losing market share. It’s just a better understanding or acceptance of consumers and the role that fat plays in their diet. Our quota is based on butterfat, so as that market grows, we need to meet the demand and allocate quota.”

Figures presented at Alberta Milk regional meetings indicate a steady growth in butterfat demand across all western provinces since 2010, while demand in British Columbia and Alberta has been rising since 2005.

More quota is good news for dairy farmers, though it presents challenges.

“For the most part we’re very pleased with the kind of growth we’re seeing,” Alberta Milk general manager Mike Southwood said at the Lethbridge regional meeting.

Though consumption of food requiring butterfat is up, the same is not true for all classes of milk that make up total production.

“The reality is that fluid milk sales as a whole have been declining,” said Kootstra.

“Consumers are drinking the higher fat in the fluid milk they’re consuming, but they’re drinking fewer glasses of milk, which is not unusual. It’s a trend that’s recognized in most of the western world.”

Dairy Farmers of Canada has established a business objective of keeping the decline in milk sales to 1.6 percent in 2017.

The challenge in producing more butterfat lies in handling skim milk, the other primary ingredient in dairy production. Kootstra said both Canada and the U.S. struggle to find markets for skim.

“To have long shelf life, it needs to be dehydrated to make skim milk powder,” he said.

“If you don’t have the drying capacity, you can’t dry it and so often today, its redirected and it becomes a feed source for animals or dumped in lagoons.”

The Canadian dairy processing industry does not have sufficient drying capacity to handle all the skim milk produced, said Kootstra. Processors haven’t been motivated to invest in capacity, in part be-cause of national policies governing proteins.

The National Ingredient Strategy being developed by the Canadian dairy industry is expected to help address the problem and encourage processors to use more skim milk.

“It is designed to address the value and create a market-priced Canadian ingredient so that Canadian processors use Canadian ingredients in the manufacture of dairy products,” Kootstra said.

“It’s a strategy to be price competitive with other sources of protein that they have the privilege of using,” namely imported product primarily from the U.S.

Kootstra said Canadian dairy producers now bear the cost of skim milk disposal. The ingredient strategy would obligate processors to find a place for the product and would include a pricing component that makes it attractive for them to do so.

The proposal has raised the ire of the American dairy industry, which says the strategy will reduce U.S. exports of milk proteins to Canada. Dairy groups and companies have written letters urging their state and federal governments to protect the current state of U.S. milk protein exports.

Those objections have also brought Canada’s system of supply management, which includes dairy, back into the spotlight.

Supply management is widely considered to be a target should the North American Free Trade Agreement be reopened, as U.S. President Donald Trump has said he will do.

Kootstra said trade is always on dairy producers’ radar.

“When CETA (the Comprehensive Economic Trade Agreement with Europe) was concluded in February of ’16, we were fairly confident that supply management was protected and entrenched in the Canadian system for some time,” he said.

“With the election of Mr. Trump and his intention to opt out of TPP (Trans-Pacific Partnership) and open up NAFTA, the whole discussion around Canadian supply management principles is back on the table.

The federal government an-nounced a compensation plan for Canadian dairy farmers because CETA will allow Europe to export 17,700 more tonnes of cheese to Canada, potentially affecting domestic demand.

Kootstra said details of that compensation remain to be seen.

“That $250 million, it sounds like a lot of money, but when you consider that that fund is to be distributed amongst the 11,000 dairy producers that are being impacted by this, I would argue that it would be pretty foolish to make a building plan or an investment plan based on the potential opportunity of getting some funds under this program.”

 

Source: Western Producer


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