Coronavirus: Why Canadian milk farmers dump milk | Instant News

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The big swing in demand for milk threatens havoc on prices

Dairy farmers in one of the largest dairy producing provinces in Canada are ready to dump millions of liters of milk due to coronavirus.

Ontario dairy farmers tell farmers to get rid of raw milk to keep prices stable and prevent oversupply.

Industry groups say demand has fallen because restaurants and other large buyers have closed because of Covid-19.

About 500 farms have been asked to dump 5 million liters a week, according to a trade report.

The policy is the face of last week, when Dairy Farms of Ontario, which oversees nearly a third of Canadian dairies, has asked farmers to increase production amid concerns about shortages.

“In its 55-year history, Dairy Farmers of Ontario only once had to ask producers to dispose of raw milk,” Cheryl Smith, associate CEO, told the BBC.

Canadian dairy products are produced under what is known as an inventory management system, which strictly controls production and import quotas to support prices.

At first, the industrial cooperative was worried that there wouldn’t be enough milk to meet demand, because Canadians panicked about buying at the grocery store. But the hoarding has subsided, and the milk madness has diminished.

Meanwhile, large-scale buyers such as restaurants, hotels and schools were forced to close due to federal restrictions. That means there is no milk on the shelves for sale, risking plummeting prices.

Ontario dairy farmers hope that by spilling fresh milk, the supply will be balanced and prices will remain stable. The group has not confirmed how much milk they asked farmers to dispose of, but said it would be done on a “pick and spin” basis.

The manufacturer notifies Ontario Farmer, a trade publication, that around 500 farms in all provinces have been asked to dispose of five million liters a week. The province produces around 3 billion liters of milk per year, or about one third of Canada’s total supply.

“We work very closely with processors and industry groups to respond to unpredictable market fluctuations that are now part of our current environment,” Smith said in a statement.

Dairy farmers Newfoundland and Labrador, another provincial dairy association, asked farmers to dump 170,000 liters last week. This province produces around 50 million liters per year.

American Dairy Farmers, the largest dairy cooperative in the US, has also asked farmers to dump milk.

Dairy farmers are not the only industry struggling with how coronaviruses affect their supply and demand. Global oil prices have fallen due to demand, because factories have closed and air travel has stalled.

But unlike the milk group which asks members to dispose of milk to keep prices stable, the Organization of the Petroleum Exporting Countries (OPEC) has decided to increase production. The move, fueled by a price war between Russia and Saudi Arabia, has pushed prices even lower.

The supply war has wreaked havoc on other key Canadian oil industries, which are mostly based in the province of Alberta.

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