ABBOTSFORD – A rise in demand for dairy is good news for producers, who will see margins expand in 2025 as farmgate milk prices hold steady and costs fall.
Recapping market conditions at the BC Milk Marketing Board’s fall producer meeting in Abbotsford, October 28, Kevin Mammel noted that milk utilization is up, with processors using every drop they can.
This has led to incentive days being offered to producers in BC and across the four Western Milk Pool provinces through March 2025, as farms try to boost supply to meet demand.
Moreover, the marketing boards in the four western provinces are issuing a 2% increase to continuous daily quota effective January 1 to eligible producers.
“This increase in daily quota is being issued to meet the continued strong demand in both the fluid and industrial markets that is forecasted to continue into calendar year 2025,” an announcement regarding the increase stated.
This is the third quota increase since February 2024, and comes in advance of projected demand at the new plant Vitalus Nutrition plans to begin building in spring 2025. (Supply to Vitalus will not be met solely through quota increases.)
The announcement followed the Canadian Diary Commission’s decision November 1 to leave farmgate milk prices essentially unchanged next year in view of lower production costs.
The farmgate milk price will fall by 0.02% on February 1, a marginal decrease compared to the sharp increase in the BC blend price over the past two years as fluid milk consumption has increased.
CDC reviews cost of production data annually for more than 200 farms across Canada, including 22 in BC. The data feeds into a national cost of production, weighted by province (BC’s share is 9%), working out this year to a national average of $90.36 per hectolitre (hl).
On the plus side, that’s below the current net blend price BC producers receive of $101.33 per hectolitre.
But no one wants to see a price decline.
“We were expecting this,” Mammel told producers in the run-up to the CDC’s announcement. “Your COP has gone down; it has also gone down in other parts of the country.”
The most significant drop came in the price of purchased feed, which fell $2.85 per hectolitre. This more than offset increases in labour, taxes and interest charges.
“This is an extreme year; costs have come way off from $93.09 to $90.36 this year. We would have needed a big CPI increase to see a positive increase in the blend price,” Mammel said, referencing costs from two years ago.
Sharply higher consumption of fluid milk is emerging as a good news story for producers and will help offset the impact of the national pricing announcement.
“When you put more milk into Class 1A, in fluid, you create more revenue per litre, and that puts your blend price up,” he explained.
New approach
BC Dairy Association general manager Jeremy Dunn discussed the new approach to transforming the Western Milk Pool into a truly regional body.
Rather than adopting a new governance structure, an initiative challenged by regulators in several provinces, the four western provinces are now seeking a collaborative relationship.
Recent announcements regarding incentive days and quota increases illustrate the new approach, emphasizing the role of the provincial marketing boards in the decision.
This is in keeping with a concern of the supervisory bodies in each province that the marketing boards retain decision-making authority within their respective jurisdictions.
Questions regarding the cost of the transformation initiative, now abandoned, were not answered.
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