Alberta dairy farmers are watching their product — and their profits — circle the drain.
“Some of our skim milk does not have a commercial value, and that compromises our prices,” said Tom Kootstra, Alberta Milk chair.
“We do our best to find a use for this skim milk that has no place in the human food chain, but there’s difficulty finding a home for all this skim milk.”
In the dairy industry, skim milk is largely viewed as a byproduct of the more valuable butterfat component of milk. And while Canadian dairy farmers are meeting the “unprecedented growth” in demand for butterfat among consumers, demand for skim milk products has not kept pace — nor has investment in infrastructure to process skim milk for other uses.
“We’re seeing the imbalance between production and processing across the western milk pool and across Canada as a whole,” said Kootstra, who farms near Ponoka.
“We struggle with the infrastructure to salvage all of that skim milk and dry it to make skim milk powder, which has other uses.”
Alberta Milk officials said they do not have statistics on how much skim milk has no market, nor information on what is being done with it and what financial impact it’s having on producers. However, during a similar situation in Ontario in 2015, Dairy Farmers of Ontario admitted some skim milk was being dumped into lagoons or manure pits. Most of the excess skim milk, however, was used for animal feed.
While skim milk powder is primarily used in feed rations or exported, Canadian dairy processors are mainly focused on where they make their money.
“The infrastructure is there to meet the Canadian requirements and the demand for butterfat,” said Mike Southwood, general manager of Alberta Milk.
“But we only ship raw milk off farms. So for the other components of milk, the infrastructure hasn’t kept up with that.”
Processors need to see a return on their investment, and up to this point, that return hasn’t been there, Kootstra added.
“For our processors to invest in expansion, they need the time to recognize that this market is real and that, in order for them to capitalize on this opportunity, they need to make an investment,” he said. “That investment takes time.”
Plant expansions can take between 12 to 18 months to complete, while construction on a brand new plant can take upwards of two years. Dairy producers can increase their production incrementally to meet demand, but that’s not the case for a processing facility once it’s at capacity, said Southwood.
However, some expansion is occurring. A new $100-million dairy-processing plant opened last fall in Manitoba. A facility in B.C.’s Lower Mainland has expanded, with another expansion in the works for a processor in southern Alberta. Some of this development has been spurred by innovative ways to use milk components.
“We’re seeing some great research being done at the large processors to find new uses for dairy products that will help ensure all the components of milk are used — not only the butterfat,” said Southwood.
Developing those technologies takes time, as does finding a market for the end products, but the dairy industry is working collaboratively on that, he added.
“In 50 years of supply management, we have not seen a situation where we have not continued to evolve and grow to meet those new demands,” he said. “During that time, those investments have come. The need for this one came a little bit quicker on us than we thought, so we’re at a point where we need it today. But it will come.”
In the short term, producers might feel the sting of lower prices because of unmarketable skim milk, but Kootstra doesn’t see that as a risk to his operation, or to the industry.
“The science of how we mine the nutrients in skim milk just continues to evolve,” he said.
“It’s not so much a risk — it’s an opportunity that we’re working hard to capitalize on going forward.”
Kootstra also said he believes western Canadian dairy-processing capacity will continue to grow as more uses are found for milk components.
“That investment by processors is happening, and it will pick up its pace over the next 36 months,” he said. “I’m disappointed it’s taking this long, but you don’t just build a modern dairy plant overnight.”