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COUNTRY LIFE IN BC • MARCH 2018 Dairy outlook faces growing headwinds
Skim milk powder surplus, interest rates, NAFTA pose risks mix of products that land. If instead of coming in as fluid (UHT) milk, it came in as butter, Gervais believes it could actually help Canadian producers by balancing out skim milk stocks. BC Dairy Association
by DAVID SCHMIDT ABBOTSFORD – The growth
in dairy consumption is one of the most underrated stories in agriculture, says Farm Credit Canada vice- president and chief economist Jean-Phillipe Gervais. Even though that growth is expected to slow down, it provides an optimistic outlook for milk producers, he told a special Mainland Milk Producers meeting in Abbotsford, February 9.
Despite that, Gervais didn’t paint too rosy a picture, warning producers not to expect prices to go back to $85 per hectolitre. “I expect prices to be flat [at about $80/hl] for the next 12 months.” Greater consumption of cheese and butter also means increased skim milk powder, which is already in a worldwide surplus. Although the creation of Class 7 (protein concentrates, skim milk and whole milk powder)
and the new National Ingredient Strategy are helping Canada get rid of its skim milk powder, the surplus puts pressure on the overall prices producers receive as those products are being sold at world market prices. Gervais said North America faces rising interest rates, noting the Bank of Canada hiked its prime rate three times in the last year and is expected to raise it again this spring. While the Bank of Canada’s rate could increase 75 basis points, Gervais suggests financial institutions could raise their rates even more to keep pace with rising interest rates in the US. The value of the Canadian dollar is also dropping. Gervais expects it to settle out at less than 80¢ US. While such shifts are generally positive, milk producers may not see the benefits. “A one-cent change in the
exchange rate equates to a 10¢/hl change in your milk price,” he said. Of equal or perhaps even
greater concern is the impact of trade negotiations. Canada has already given up 2% of the Canadian market in the Canada- European Union Free Trade Agreement and is giving up another 3.25% in the new CPTPP (Comprehensive and Progressive Agreement for Trans Pacific Partnership). “Using a 16-to-1 ratio, that could translate to a $7 billion change to Canada’s GDP,” Gervais said. The actual impact will depend on the
QUOTA review
can work with.” Vitins has a long history in the corporate world of organic agriculture and is particularly supportive of FIRB’s new reporting requirements and its emphasis on specialty/niche markets. “It’s about producing
everything the market is looking for. We need sound
marketing information which has been lacking in the past,” she says, adding, “as a new chair, I want to formalize our reporting structure. Communication is a new era for us.” Former FIRB executive
director Jim Collins, now chair of the BC Broiler Hatching Egg Commission, says he “supports the principles” of the report. He’s “thankful they’ve moved off LIFO,” adding the commission is “still digesting the implications.” Since the BC Milk
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Marketing Board was the most vocal opponent of both LIFO and 10/10/10, it was “pleasantly surprised” by the report. “It has given us some
flexibility on concerns expressed by the industry,” says BCMMB director Corny Hertgers. BC Dairy Association
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president David Taylor agrees, calling the new directions “something industry can live with.” “This brings flexibility back to us and allows us to right- size our farms. If anyone is to be penalized, it’s people who are leaving the industry and that’s as it should be,” he says, adding, “I think it’s fair that producers who sell can’t get any new quota for 12 months.”
Voice of dissent Van’t Haaff clearly
disagrees with everyone else’s assessment.
Her dissenting opinion, which is perhaps more reflective of public rather than industry opinion, states there
executive director Paul Hargreaves said Dairy Farmers of Canada initially estimated the CPTPP would result in a $246 million direct revenue loss to Canadian producers but has now revised its estimate down to $160
million. Gervais said NAFTA
remains the biggest question mark. He expects the situation to remain uncertain for the rest of the year, saying it’s “50-50” whether the US will actually pull out of the agreement. “US agriculture wants
NAFTA to continue. It would lose the most if the US pulls out and there’s a lot of agriculture in the states that supported President Trump,” he notes.
nfrom page 7
is no reason to change FIRB’s previous LIFO or 10/10/10 directives, saying “arguments to support a case for change” from the milk and egg boards “were inadequate and poorly supported.” “If the commodity boards cannot provide compelling industry-specific reasons for BCFIRB to change its course, why is BCFIRB changing its course?” she asks. She accuses her fellow
board members of being in league with producers, insisting, “BCFIRB should not be in the business of removing assessments where the primary outcome … is to facilitate economic gain to individual producers.” Van’t Haaff says the “actual
result” of the majority decision is to turn quota into “a personal banker.” She thinks that’s wrong. “There was never a promise, in supply
management, of a pot of gold at the end of the rainbow,” she states, saying the new rules mean windfall gains for producers.
“BCFIRB should not be encouraging the sense of entitlement that appears to have entered into the mindset of some commodity boards and producers,” she says, calling that “a violation of the public trust.” “There is, in my view, a
great difference between pronouncing that the public interest has been served and protected, and actually serving and protecting the public interest,” she concludes.
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