In the past processing capacity determined how much production could take place. That is changing with an added milk processing capacity with several plants, including the expanded facilities at Teeswater’s Gay Lea plant.
“Now with the processing coming online we have to be able to estimate when it’s going to happen and a nice problem is to try and ensure that we have the milk that those plants need at that time,” Dietrich said Thursday during an update on Ontario’s dairy industry at Farmers’ Week in Elmwood.
Dietrich said the demand for more milk will result in an increase in the amount of quota available to dairy farmers.
“Our domestic growth projections are good for the three, to four, to five per cent growth just from an existing capacity; the new capacity system would put in another three or four or five per cent,” he said.
Dietrich said it’s important to continue to work closely with both the federal and provincial governments to maintain a strong position during North American Free Trade Agreement talks with the U.S. and Mexico.
He noted the importance of Canada’s role in NAFTA with 35 U.S. states trading with Canada and 20 states trading with Ontario.
He praised the strong stance taken by Ontario’s Agriculture minister, Jeff Leal, to protect supply management during the NAFTA talks.
Dietrich said pressure by other milk-producing countries for Canada to give up its supply management system is an unrealistic expectation especially since Canada is such a small player in export markets.
“The rest of the world thinks we can solve their problem with respect to dairy, keeping in mind that the state of California produces more milk than the country of Canada,” said Dietrich.
Dietrich said the supply management system provides consumers with the products they need.
“It’s a system that balances requirements with supply,” he said.
He described the problems that other jurisdictions have with their system of over production without the an adequate market to handle increased production.
“They fail to realize what is causing their own problem is their own greed and they just produce, produce, produce. You can’t do that. As with any commodity in this world if you have more than you need, things are going to get cheaper and when you’re short of it prices go up; it’s just a fact for every commodity . . . they need not shift any focus or blame on others without looking at themselves first,” he said.
In eastern European countries where supply management has been abolished there have been increased number of bankruptcies among producers.
“If you’re going to increase production you’ve got increase your demand for the product. And they have to go hand in hand or else you’re going to end up with the lows and the highs of your product sales; supply management gives that steady, predictable income which is not only good for the producers, it’s also good for the bankers, it’s good for consumers as well,” said Dietrich.
Dietrich denies the claim that Canadians pay more for dairy products than Americans.
He admits that the price of milk in stores in American border towns like Buffalo, or Seattle is cheaper.
“But travel another 50, 60 or 100 miles south of the border and the prices are right back up to where we were,” he said.
Given the exchange rate on the Canadian dollar Canadian dairy products end up sometimes being cheaper than some of the rest of the world, the U.S. included, Dietrich said.
Thanks to a 2014 Time Magazine cover story dairy products are now widely considered a healthy food resulting in increased demand for milk.
“Consumer’s are becoming more conscientious about what they are eating, not only what they are eating but where it came from. Local food is a big thing. The fact is that our consumers have the confidence that the consumption of dairy products is a good thing,” said Dietrich.
Dietrich said last year the demand for almost all dairy products was on the rise including cheese, yogurt, cream and butter.
“Just in the last month ice cream has trailed off a little bit but we did have positive growth figures in ice cream as well this which is the first time in a long time,” he said.
Fluid milk remains a concern because consumption is down. However there is a switch to products with higher butter fat content.
“Skim (milk) is the biggest shrinking market,” Dietrich said.
Dietrich said the drop in fluid milk demand is partially related to a decrease in consumption of breakfast cereals.
“We need to reinvigorate that category. It’s not really user friendly and package friendly right now,” he said.