Setting world prices for milk protein components will put everyone on the same playing field, reducing cheap imports
CALGARY — Canadian milk producers and processors are working to implement a national ingredient strategy designed to use more skim milk product and reduce imports of protein isolates and milk protein concentrates.
Albert Kamps, outgoing chair of Alberta Milk, praised the agreement reached by the parties in-volved during the Nov. 23 annual dairy conference.
“This agreement will change how we manage and utilize milk well into the future,” said Kamps.
“Both the producer boards and processing sector are now working hard to flesh out the implementation details and getting the regulatory authorities in place to implement this historic achievement.”
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The strategy is a new method of pricing protein components in milk. Kamps said it means many products will be set at the world price so Canadian ingredients can be economically used by processors instead of imported ones.
“Many of our protein isolates and milk protein concentrates are products that weren’t invented yet, they weren’t able to make them, when our trade agreements were signed,” Kamps said.
“There’s no tariffs to keep foreign product out, and our system hadn’t modernized enough to price them competitively. Everything was made into skim milk powder, and these other byproducts were brought in instead.”
The new strategy makes processors responsible for the skim milk powder portion of the milk they order, instead of selling it to the Canadian Dairy Commission.
This powder portion had previously gone primarily into animal feed and sold at prices below the world price.
Dan Wong, executive director of the Alberta Dairy Council, said the change will be significant.
“I’m optimistic that the agreements that we reached between producers and processors will position us for a stronger and more vibrant future, but let’s not make any mistake. It’s going to be scary because the change is going to be profound.”
However, he said such changes are necessary in the face of price pressure and uncertainty about supply management’s future in trade agreements.
“We’re cautious about making new investments because we’re uncertain about the future policy directions that are in front of us. We probably feel uneasy that the decisions that are being made that will affect our businesses are actually being made thousands of miles away, whether in Ottawa or in Brussels or in the period to come, maybe even Washington D.C.”
All provinces and the CDC have approved the strategy, and now it is a matter of due diligence before putting it into practice, Kamps said later.
“It means less good food going into animal feed, and it means more of our product being used in our cheese.”
Anticipation of strategy implementation has already led to various upgrades and deals in Canadian processing plants so the specialized milk protein ingredients can be produced here.
The move is expected to address the massive surplus of skim milk powder, which Kamps estimated at 100,000 tonnes. Foreign milk protein products imported to Canada were generally priced below domestic prices, reducing processors’ desire to invest in upgrades or additional plants.
“We’re modernizing the whole supply management system so that it reflects today’s technology and today’s cheese-making processes,” said Kamps.
He said the changes are not expected to increase prices for consumers.
“These processors that make cheese will get their ingredients from the cheapest price. We’re lowering our price to world price so it should make no difference at all.”
The issue surrounding Canadian non-fat milk solids, also known as SNFs, was highlighted in the Farm Credit Canada spring 2016 economic outlook for the dairy sector.
“Processors’ demand for SNF to be used in high value milk classes has been weaker in recent years due to increasing imports of milk protein concentrates and isolates from the United States. These imports displace SNF towards lower value milk classes, resulting in a lower overall farm price in 2015,” the report said.
“The surplus (skim milk powder) arising from increasing Canadian production is compounded by increasing imports of proteins from the U.S. As of January 2016, imports had grown to 10.4 times their 2011 levels. The imported proteins are displacing Canadian SNF, typically used in the production of cheese, yogurt, etc., to be used in the processing of products in lower value milk classes.”
