A greater demand for dairy products does not necessarily mean improved farmer revenue or an increase in producer quota.
That is the complicated world of Canadian dairy production.
Fluid milk consumption is dipping, but consumers are developing a growing indulgence for butter, yogurt and ice cream.
Complicating matters is the industry’s efforts to encourage Canadians to use more dairy in their diets for the health benefits, which comes at a time when the world is full of new energy drinks and dairy substitutes made from vegetable fat.
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The notion that everybody likes dairy products and everybody eats dairy isn’t necessarily true,” Ian MacDonald of the Dairy Farmers of Canada told Alberta Milk’s annual meeting in Calgary Nov. 17.
Dairy Farmers of Canada spends $19 million a year on national nutrition promotion.
Per capita milk consumption dropped to 81.2 litres in 2009 from 85.5 litres in 2004, while cheese consumption grew to 12.28 kilograms in 2009 from 11.96 kg in 2004.
MacDonald said consumers may turn away from dairy products because of price or worries about cholesterol, fat or sodium.
“These are factors competitive products can exploit to their benefit to the detriment to the dairy category,” he said.
However, dairy is still a strong component of the Canadian diet, and total revenue for liquid and industrial milk sales reached $5.6 billion last year.
Farmer income is split between fluid milk sales and industrial milk, which is used to make cheese, butter, yogurt and ice cream.
Nearly two-thirds of industrial milk is processed into cheese, accounting for $3.1 billion in farm revenue.
Benoit Basillais of the Canadian Dairy Commission said milk consists of many components and some are easier to sell than others. Finding a market for each can affect producer quota.
He said sales promotions can often result in an upsurge in consumption of some products.
“After a promotion we are going to sell way more butter for a month after. The same goes for cheese,” he said.
Provincial milk marketing boards allocate production quota to farmers that combines fluid and industrial milk quota.
Industrial milk quota, which is also called market sharing quota (MSQ), is established nationally and calculated and expressed in kilograms of butterfat. Fluid milk quota is established by provincial marketing boards and equals demand.
Milk producers have seen changes in their quota in the last five years, especially when fluid sales improve, but Basillais said slow butter sales can also affect quota.
“Whenever there is a one percent change in your retail sales, you will only get a quarter of that in your total quota,” he said.
