MARKETS
[ MONITORING BUTTER STOCKS HEADING INTO DECEMBER
D
ue to current market conditions, P5 boards have decided there will be no change to the current two incentive days for November 2021. During the summer, the industry faced an imbalance between milk supply and demand due to a combination of issues, including a slowdown in retail sales, slower than expected recovery in the food service sector, the arrival of imported dairy products and processing constraints. This resulted in the reduction of incentive days—a decision that has now put the industry in a better position to balance supply with demand. “This is a good example of how the supply management system has demonstrated it can adapt to a very unpredictable and volatile marketplace,” says Patrice Dubé, Dairy Farmers of Ontario’s chief economics and policy development officer. Heading into the holidays, P5 boards will continue to monitor market conditions and butter stock levels to determine if production signals are needed in the new calendar year. Demand for butterfat is typically high during the holidays as families host social gatherings and purchase more butter for baking and cooking. However, with the ongoing pandemic, Dubé says
it’s hard to determine whether the holidays will spark an increase in demand this year. “What the holidays will look like this year will be very provincial specific,” he says. “Some provinces are still struggling, while others are in a better position, so whether families celebrate a normal holiday this year is still very much up in the air.” Butter stock levels at the end of December are a key indicator of whether the system needs more milk in the new calendar year. “If butter stock levels drop to a level close to 20,000 tonnes at the end of December, it is one indication there could be a need for additional milk in the system to rebuild those stocks for the remainder of the dairy year,” Dubé says. As of the end of September 2021, butter stock levels reached 28,300 tonnes—a 3,800-tonne drop since August 2021 when stocks were at 32,100 tonnes. This is an indication there’s strong short-term demand, Dubé says. Meanwhile, the Canadian Dairy Commission is revisiting its long-term forecast for demand. Given current market trends, Dubé says it’s likely the industry will still see a two to three per cent increase in demand for the current
P10 UTILIZATION BY CLASS*
% Butterfat % Solids non-fat
For August 2021 (kg of butterfat/kg of solids non-fat) 11.91%
1a1 1b
2.72%
2a
2.64%
2b4
% Revenue
*27.65%
23.88% 14.90%
*8.71% *4.87%
6.04%
4.05%
*2.42%
0.79% 2.75% 0.22% 1.06% 1.10%
2b5 3a1 3a2
*1.47% *1.19%
4.47% 5.73%
3b2
*5.41% 13.78% 12.74%
3c1
*13.78%
0.77% 1.06% 2.55% 2.93%
3c2 3c4
*0.82% *3.03% 6.42%
3c6
*8.26%
9.53%
0.43% 0.38%
3d
*0.38% 3.30% 4.71%
4a
*3.37%
17.17% 17.55%
4d
0.50%
*13.28% *0.04%
5.66%
2.69% 2.85%
5a 5b
1.61% 1.80% 0.51%
5c 0% 20
*
5%
*1.74% 8.82%
*2.87% *0.70%
10%
NOVEMBER 2021 | MILKPRODUCER
15%
20%
25%
30%
35%
dairy year. However, it is still unclear how this increase could translate into an additional production signal. In terms of national dairy product sales at the retail level, for the 52-weeks ending September 2021, sales for fluid milk, fluid cream, yogurt, ice cream, cheese and butter increased by 1.7, 5.3, 1.4, five, 3.6 and 6.5 per cent, respectively, compared with the 52-weeks in September 2019, prior to the pandemic. Recent retail sales data also indicate sales continue to gradually return to its pre-COVID trends as the food service sector continues to reopen. Total national butterfat requirements for the 12-months ending August 2021 reached 1.13 million kilograms compared with 1.08 million kg the year before. Meanwhile, total P10 milk production for the 12-months ending August 2021 reached 1.09 million kg compared with 1.05 million kg the year before. P5 boards’ primary objective is to continuously monitor the milk market situation and meet demand in the most optimal way. Given these uncertain times, P5 boards will continue to adapt production signals to address market changes, as required.
Class 1a1 (includes Classes 1a2, 1a3, 1c and 1d for confidentiality reasons) Fluid milk and beverages Class 1b Fluid creams Class 2a Yogurt, yogurt beverages, kefir and lassi Class 2b4 (includes Classes 2b1, 2b2 and 2b3 for confidentiality reasons) Fresh dairy desserts, sour cream, milkshakes and sports nutrition drinks Class 2b5 Ice cream and frozen yogurt Class 3a1 Specialty cheese Class 3a2 Cheese curds and fresh cheeses Class 3b2 (includes Class 3b1 for confidentiality reasons) Cheddar cheese and aged cheddar Class 3c1 Feta Class 3c2 Asiago, Gouda, Havarti, Parmesan and Swiss Class 3c4 (includes Classes 3c3 and 3c5 for confidentiality reasons) Brick, Colby, farmer’s, jack, Monterey jack, muenster, pizza cheese, pizza mozzarella and mozzarella other than what falls within 3d. Class 3c6 Paneer Class 3d Mozzarella used strictly on fresh pizzas by establishments registered with the Canadian Dairy Commission Class 4a Butter and powders Class 4d (includes Classes 4b1, 4b2, 4c and 4m for confidentiality reasons) Concentrated milk for retail, losses and animal feed Class 5a Cheese for further processing Class 5b Non-cheese products for further processing Class 5c Confectionery products WWW.MILKPRODUCER.CA
