TORONTO: A blame game is underway in Canada aimed at whoever was responsible for the butter shortage there just ahead of the recent Christmas holiday period.
As a country, Canada is one of the top producers of butter, but a recent surge in demand saw stocks run so low they almost ran out. In fact, Canada was forced to import 4,000 tons of butter to meet the demand and beat the shortfall from countries such as Ireland, New Zealand, Belgium and Uruguay.
Fingers have been pointed at the Canadian Dairy Commission, the body that keeps the dairy industry there flowing, as to why it allowed the deficit to happen.
Sara Dorland, analyst with the Daily Dairy Report and managing partner at Ceres Dairy Risk Management of Seattle, said, “The butterfat shortfall in Canada was so severe last year that the Canadian Dairy Commission authorized license holders to import up to 4,000 metric tons or 8.8 million pounds, of butter.”
Even though there was butter in the United States, exporters were reluctant to ship it north under the increased quota due to prices there being higher than in Canada – and a similar increase in demand from American consumers.
Demand for butter has increased by two to three percent annually over the past two years, according to the Dairy Farmers of Nova Scotia. Demand for fluid cream has climbed by 3.5 percent.
Dorland said Canada’s annual butter quota is limited to 3,247 metric tons a year, with 2,000 metric tons of that set aside for New Zealand butter.
“That makes the latest increase in quota significant,” she said. “In addition to managing the nation’s milk supply, the commission is charged with buying butter during the summer months for use in fall and winter.
“But much like in the United States, butter demand has risen so sharply that the Canadian Dairy Commission was caught flat-footed.”
In addition to increasing imports, the Canadian Dairy Commission authorized a 4.8 percent increase in milk quota at the start of 2014, but producers have not yet been able to fill the butterfat supply gap. Skim solids are in oversupply in Canada, she added.
“Due to Canada’s supply management system, the ramping-up period has been prolonged because dairy producers have to access quota and infrastructure investments to grow the milk supply,” she said. “Likely these delays, exacerbated by increasing butter demand, led to the sharp drawdown of butter stockpiles last year.”
Greg Nogler, vice-president of sales at Stirling Creamery in eastern Ontario, said the Canadian Dairy Commission failed to correctly forecast butter consumption.
And to make matters worse, the shortage of butter is coming at the same time that the Trans-Pacific Partnership free-trade agreement is being finalized. Under the agreement, Canada is expected to increase dairy-product imports by the equivalent of 3.25 percent of its 2016 milk production, according to Dairy Farmers of Canada.
“The (Trans-Pacific Partnership) has been contentious in Canada to say the least as survival of its decades-old dairy-supply management system comes under question,” Dorland said.
