Dairy processors struggle to address organic milk shortage

Tuesday, March 10, 2015

by SUSAN MANN

An organic milk shortage in Ontario is impeding dairy processors’ ability to manufacture some products like yogurt and cheese to their fullest extent.

Guelph-based milk processor Organic Meadow said in a Jan. 21 letter to retailers its company has been impacted by the shortage more than other dairies. “It (the milk shortage) has limited our ability to produce some of our cultured products that utilize Class 2 milk, like yogurt, cream cheese, cottage cheese and sour cream.”

Organic Meadow CEO Don Rees says the shortage is having a “pretty significant” impact on the company’s business. “We participate in all organic dairy segments,” including fluid milk, yogurt, cheese, ice cream, and butter.

Rees would not disclose details of how much of a financial impact the shortage has had, saying they don’t publicly discuss the numbers.

Canadian-produced milk is sold to processors through a milk classification system for the manufacture of various products in classes outlined by the dairy industry. The classes range from Class 1, fluid milk and cream, to Class 5 (d) milk used for exported products for which the Canadian Dairy Commission has issued a permit.

The Organic Meadow letter, signed by Maurice Bianchi, director of marketing, consumer and trade, notes retailers will likely experience shortages of cultured products during this time of short supply. The company is working closely with Dairy Farmers of Ontario to rectify the situation.

Dairy Farmers general counsel and communications director Graham Lloyd says by email the organization is acutely aware of the shortage and is trying to find ways to get more organic milk into the system. The shortage isn’t in conventional milk.

Class 1 or fluid milk is the number one priority for both organic and conventional milk. Lloyd says DFO tries to satisfy processors’ orders for Class 1 milk first. Once those are fulfilled, orders for Class 2 can be addressed.

Class 2 is yogurt and yogurt beverages, such as kefir and lassi, along with ice cream, ice cream mix and ice milk mix, sour cream, fudge, pudding, soup mix, milk shake and milk shake mix.

Lloyd says there are 72 organic milk shippers in Ontario producing about two million litres a month. The demand is greater than 2.8 million litres a month, resulting in a monthly shortage of about 800,000 litres.

“This can be reduced by milk supplied by Quebec,” Lloyd notes. Companies can also use supplemental import permits to import organic products from the United States but “there is a shortage in the U.S. as well,” Lloyd says.

Rees says the milk shortage is cascading down to other products, such as cheeses and dairy ingredients. Demand from consumers, retailers and processors is “outstripping the supply of organic milk.”

Increased demand and lack of supply is causing the shortage, he says. “The organic farm community hasn’t migrated to organic dairy farming as quickly as the demand has picked up,” Rees says, adding it takes three years for a farm to transition to organic production from conventional. “It’s not going to happen overnight.”

Rees says educated, informed, health conscious consumers are driving the demand. They’re “searching for organic options in every single” food category, not just in dairy products.

The organic milk shortage has been felt since November 2014 “when the cows stopped grazing,” Rees says. Once the spring hits “there will be a little bit more milk available. We believe everybody needs to work together co-operatively to build the (organic milk) pool.”

The situation is particularly unfortunate for Organic Meadow, which supplies 70 per cent of the milk into the organic milk pool “yet we’re not able to access the amount of milk we require to make our Class 2, 3 (cheeses) and 4 (butter, dairy ingredients) products,” Rees says. On most days, Organic Meadow has enough milk to make its Class 1, fluid milk, products.

There are more than 60 organic dairy farmers who are members of the Organic Meadow co-operative. Marketing manager Michelle Schmidt says the milk from the Organic Meadow-member farms is sold to Dairy Farmers of Ontario along with milk from other organic farms. “All that milk is collectively pooled and then it is allocated to the different processors.”

To rectify the situation, Rees says the premium for organic milk has been increased by three cents per litre. Lloyd says Dairy Farmers has increased quota and incentive days for organic producers. The organization is also looking at creating an organic milk pool for the five eastern Canadian provinces that are part of the milk pooling agreement. They are: Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island. BF