Wednesday, May 18, 2016

Mussell approves DFO milk pricing


Economist Al Mussell says the Dairy Farmers of Ontario marketing board is on the right track with its new Class 6 milk pricing policy.

It aims to lower the price of milk that goes into products such as skim milk powder so Canadian processors can match global competition.

The industry is trying to cope with an increasing surplus of skim milk.

Mussel says the same pricing approach will reduce the attraction for importing diafiltered milk. Imports have been surging as more processors find it lowers their cost of making products such as cheeses and, as some import the cheap product, others begin importing to remain competitive.

Earlier this month Agropur said it will stop importing because the Dairy Farmers of Canada, the national supply management agency, is lowering the price of Canadian-produced milk that goes into products now using diafiltered milk.

Mussel says the benefits of lowering prices for Class 6 milk outweigh the risk, which is basically that trading nations will ban Canadian exports that are made with Class 6 milk.

He says the volume of Class 6 milk sales will be low enough that dairy farmers won’t notice much change in their milk cheques.

Quebec farmers have opposed lowering milk prices to clear the skim milk surplus and to offset imports of diafiltered milk.

Their approach calls for a decline in milk production to clear the skim milk surplus, an increase in butter imports to balance supply and demand for it, and a tightening of cheese standards to ban the incorporation of diafiltered milk.

The different approaches have generated tensions - and some angry words - between leaders of the national agency, Quebec and the Ontario board when it chose to go it alone with the Class 6 pricing policy.