13 minute read
Market demand
from November 2021
by MilkProducer
MONITORING BUTTER STOCKS HEADING INTO DECEMBER
Due 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 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.
P10 UTILIZATION BY CLASS*
For August 2021 (kg of butterfat/kg of solids non-fat) % Butterfat % Solids non-fat % Revenue
1a1 1b 2a 2b4 2b5 3a1 3a2 3b2 3c1 3c2 3c4 3c6 3d 4a 4d 5a 5b 5c
11.91%
2.72% 2.64% 6.04%
0.79% 4.05%
0.22% 2.75%
1.06% 1.10%
4.47% 5.73%
0.77% 1.06% 2.55% 2.93%
6.42%
0.43% 0.38%
3.30% 4.71% 9.53%
0.50%
2.69% 2.85%
1.61% 1.80% 0.51% 5.66%
8.82% 14.90%
13.78% 12.74%
17.17% 17.55% 23.88%
*27.65% *8.71% *4.87%
*2.42% *1.47% *1.19%
*5.41% *13.78%
*0.82% *3.03% *8.26% *0.38% *3.37% *13.28% *0.04% *1.74% *2.87% *0.70% 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
MONTHLY QUOTA PRICES ($/kg)
PROVINCE
Alberta Saskatchewan Manitoba British Columbia Ontario Quebec New Brunswick Nova Scotia Prince Edward Island
PRICE/kg
$48,805 $42,500 $37,250 $36,500 $24,000 $24,000 $24,000 $24,000 $24,000
AMOUNT WANTED/kg
349.80 148.50 355.87 2,098.42 19,125.78 19,940.35 681.10 1,159.48 435.80
AMOUNT FOR SALE/kg AMOUNT PURCHASED/kg
59.00 25.00 34.79 50.00 266.43 514.23 53.10 2.50 4.10 59.00 25.00 24.00 50.00 266.46 514.37 53.10 2.5 4.10
*Newfoundland does not operate a monthly quota exchange. Quota is traded between producers.
**Quota cap price of $24,000 in effect in Prince Edward Island, New Brunswick, Ontario, Nova Scotia and Quebec.
ONTARIO DEDUCTIONS, PER HL
For September 2021
Within quota Overquota
DFO administration $0.625 $0.625 DFO research $0.050 $0.050 CanWest DHI $0.060 $0.060 Transportation $2.900 $2.900 Market expansion $1.400 $1.400
Total deductions $5.035 $5.035 Average total net $72.696 -5.035
*These figures are based on Ontario’s average composition for September 2021 of 4.10 kg butterfat, 3.17 kg protein and 5.92 kg other solids, rounded to the nearest cent.
U.S. CLASS PRICES
The September 2021 Class III Price, US$16.53 per hundredweight, is equivalent to C$47.49 per hectolitre. This equivalent is based on the exchange rate US$1 = C$1.26529 the exchange rate when the USDA announced the Class III Price.
The Class III Price is in $ US per hundredweight at 3.5 per cent butterfat. One hundredweight equals 0.44 hectolitres. Canadian Class 5a and Class 5b prices track U.S. prices set by the U.S. Department of Agriculture.
ONTARIO MONTHLY PRODUCER AVERAGE GROSS BLEND PRICE
$85 $80 $75 $70
0 Oct. 202 No v. 2020 Dec. 2020 Jan. 2021 F eb. 2021 Mar . 2021 1 Apr . 202 May 2021 June 2021 Jul y 202 1 Aug 2021 Sept. 202 1
A total 3,326 producers sold milk to DFO in September compared with 3,358 a year earlier. $77.73
P5 AND WESTERN MILK POOL BLEND PRICES*
The graph below shows the 12-month blend price for the P5 provinces and Western Milk Pool (WMP).
*There is a three-month lag reporting these figures.
82
B lend price in $/hL 80
78
76
74
72
Sept 2020 Oct 2020 Nov 202 0 Dec 2020 1 Jan 202 b 2021 Fe Mar 202 1 Apr 2021 May 2021 June 2021 1 Jul y 202 Aug 2021 P5 blend price WMP blend price
WMP $79.41
P5 $77.85
SCOTT AND ANN HENDERSON, both 29, are currently in a 25 per cent sharemilking contract. They’ve come a long way since starting in the industry and are aiming for a 50 per cent contract by 2023.
FULFILLING THE DREAM OF DAIRY FARMING
Young farmers work their way up the sharemilking ladder in New Zealand
By Chris McCullough CONTRIBUTOR
Sharemilking might not be such a common concept in Canada, but in other parts of the world, the system provides a feasible entry into dairying for young people wishing to enter the industry.
The traditional model of the next generation inheriting dairy farms and perhaps having to shell out a lot of cash to parents to own the farm is under pressure since it’s just not financially possible for many.
That hurdle, coupled with the issue of succession problems and an international lack of labour on dairy farms, fronts up many challenges for dairy farmers wanting to retire.
However, in other parts of the world, such as New Zealand, sharemilking is proving to be a big success, attracting young and older farmers into the industry and onto a ladder to one day owning their own farm.
By definition, sharemilkers either milk a dairy farmer’s cows or own a herd of cows and milk them on an owner’s land for a profit share.
The most common arrangement is herd-owning sharemilking, or 50-50 sharemilking, where sharemilkers own their own herd and equipment and are responsible for employing workers and managing the day-to-day operations of the farm. In return, herdowning sharemilkers receive a percentage of the milk income, normally 50 per cent.
Over time, sharemilkers often buy out the landowner, or
FULFILLING THE DREAM OF DAIRY FARMING
Young farmers work their way up the sharemilking
alternatively, use the system as a method to save for their own property. This practice helps dairy farmers who do not own their own land and allows them to focus their investment on livestock and equipment.
Sharemilking also profits former dairy farmers who have given up their herds, by providing them with an income from renting fields, pastures and barns. And that’s exactly the road taken by a young couple in New Zealand who have quickly climbed the sharemilking ladder and have plans to one day own their own farm.
Scott and Ann Henderson, both 29, are currently in a 25 per cent sharemilking contract. They’ve come a long way since starting in the industry and are aiming for a 50 per cent contract by 2023. In a further boost to their confidence, the duo recently won a major sharemilking award in New Zealand.
Ann is originally from a beef and sheep farm at Fauldhouse, Scotland, and moved to New Zealand some years ago to gain additional experience milking cows after some milking stints in the United Kingdom.
There, she met carpenter and husband-to-be, Scott from South Otago, who had little farming experience but has quickly learned over the years.
Since 2017, the duo is following a business plan to become 5050 sharemilkers on the farm they currently work on and own all the cows in the herd by the 2022-23 milking season.
Owned by the Whitestone Trust, the farm Ann and Scott work on is based in South Otago and extends to 560 hectares—about 340 hectares is used for the dairy herd.
“It has been a dairy farm for the past 23 years, and we are currently on a three-year 25 per cent sharemilking contract,” Ann says. “We already own some cows in the herd, but it is our ambition to own the full herd by June 1, 2022, and enter into a 50-50 sharemilking contract.”
Ann and Scott have their own company called Way2Milk Dairies. On this farm, they are semi self-contained, so they have 850 milking cows, 210 calves, 210 yearlings and 60 empty carryover cows and aim to run 2.5 cows per hectare.
The farm is rolling to steep contour with main soil types Waitahuna, Warepa and Tauratu, which are all clay based. The annual rainfall is about 820 millimetre per year.
“Our milk goes to Danone to produce baby formula,” Ann says. “Danone fixes half its payout for two years and the other half floats on Fonterra. We milk cows from July 20 to May 31. After that, they are dried off. Half the cows, including the yearlings and calves, winter on the farm and the other half go to grazing.”
Their yearly production target is 320,000 kilograms, but this year, they’re on track to do a record production of 345,000 kg, Ann says.
Their cows feed on grass during the milking period, along with 235 kg of barley each per year to help with energy intake
“We make as much silage as the weather allows us to each year, which can vary depending on the climate,” she says. “This year, we made 250 tonnes of dry matter (DM), but last year, we only made 80 tonnes, so we had to buy some in.”
Cows are fed 19 kg DM during the milking season. This includes one kg barley, six kg silage and 12 kg grass.
Fulfilling the dream of dairy farming, cont’d from page 23
They measure grass weekly with a plate metre to record growth rate and pasture cover, which allows them to make decisions early.
The couple plant 30 ha of fodder beet to winter the cattle on and make 1,000 bales of baleage either on-farm or brought in. A further 20 ha of summer turnips are fed at four kg per cow from early January to March.
“The milking parlour is a 60-unit rotary with automatic cluster removers, auto drafting and teat spraying,” Ann says. “We milk twice daily from August until Christmas then we go to 10:7 milking, which means milking at 4:30 a.m. and 3 p.m. on Monday, Wednesday, Friday, 8 a.m. on Tuesday, Thursday, Saturday, and 6 a.m. on Sunday. We now own 735 of the cows and will buy another 370 in May 2022, aiming to be in a 50-50 partnership by June 2022.”
The cows are kept outdoors year-round, and there is a calving pad that holds 250 cows. Artificial insemination (AI) is used across the herd first and then Hereford bulls sweep up. The Hendersons rear 23 per cent replacements each year, and a Jersey bull is used on the yearling heifers.
“We employ three full-time staff who all have their own house on the farm and are treated as our family,” Ann says. “We have weekly meetings to cover everything that’s happening on-farm and what’s coming up.”
Diseases and lameness are the biggest problem on the farm for Ann and Scott, with Mycobacterium bovis posing the biggest threat.
“Our farm got taken out in 2019, which was devastating but it opened up the opportunity for us to share milk,” Ann says. “Farming is hard and when huge events like that happen, its soul-destroying but talking is key. Mental health and well-being are key, and we do everything we can to look after ourselves, our team and community around us.
In the couple’s current 25 per cent contract, they pay for the labour, electricity, shed chemicals, rubberwear, gear and maintenance, as well as 25 per cent of the in-shed feeding. The farm owner pays the rest. In return, the couple receives 25 per cent of the milk cheque. In a 50-50 arrangement, all costs and income are split equally.
“The next goal for us is 50-50 sharemilking and then buying a farm with 600 cows within 10 years,” she adds.
As a further boost to their goals, Ann and Scott have just won the Southland-Otago Dairy Industry Awards Share Farmer of the Year for 2021.
“Winning the competition has been invaluable to us as the contacts we have made and the publicity we have had from it has been huge,” Ann says.
Chris McCullough
is an award-winning contributor to many publications in Canada and beyond, specializing in business and technology issues in the sectors of agriculture, food, manufacturing and more.
