Executive Summary

Canadian milk production figures provided by Statistics Canada were recently updated with values spanning through the first three quarters of the ’17-’18 production season. Highlights from the updated report include:

• Canadian milk sold off farms has increased on a YOY basis throughout 47 consecutive months through Apr ’18. ’17-’18 YTD Canadian milk sold off farms is up 6.0% throughout the first three quarters of the production season, aided by increased production quotas which were implemented in an attempt to meet increasing domestic dairy demand.
• The Canadian milk cow herd has plateaued over the last several years following significant declines experienced since the beginning of the Canadian dairy supply management system. USDA is projecting the Canadian milk cow herd to finish flat throughout 2018, remaining at the record low levels experienced throughout 2016 and 2017.
• Because of the close proximity of the two countries, the U.S. has been the largest trade partner for both Canadian exports and imports of dairy products over the past several years. Canada has historically been the third largest importer of U.S. dairy exports, trailing only Mexico and China. Throughout 2017, the U.S. accounted for over half of Canada’s dairy import volumes.

Additional Report Details

According to Statistics Canada, Apr ’18 Canadian milk sold off farms increased on a YOY basis for the 47^th consecutive month, finishing up 4.2% to a record seasonal high for the month of April. Milk sold off farm figures typically account for approximately 95% of the milk produced within Canada, while on-farm use is estimated to account for approximately five percent of total milk produced. Canadian milk production has been historically tempered by a supply management system up until recent years when additional production quotas were implemented in an attempt to meet increasing domestic dairy demand. Increased milk production quotas have resulted in production levels finishing at record annual highs throughout each of the past three years. ’17-’18 YTD Canadian milk sold off farms is up 6.0% YOY throughout the first three quarters of the production season, however the Apr ’18 YOY increase in Canadian milk sold off farms was the smallest experienced throughout the past 16 months.

Milk produced within Canada supplies two markets – the fluid milk market, which includes milk used for direct consumption, creams and flavored milks, and the industrial milk market, which includes milk used to make dairy products including butter, cheese, milk powder, yogurt and ice cream. Throughout the first three quarters of the ’17-’18 production season, Canadian milk sold for industrial purposes has increased 9.6% YOY, more than offsetting a 1.2% YOY decline in milk sold for fluid purposes. Over the past five years, the industrial milk market has accounted for just under two thirds of the total Canadian milk sold off farms. USDA is projecting a 3.7% YOY increase in Canadian milk production throughout the 2018 calendar year, aided by additional production quotas which were put in place in an attempt to meet increasing domestic dairy demand.

Canadian milk production has increased significantly over recent years despite milk cow figures remaining at or near the lowest figures on record. The Canadian milk cow herd has plateaued over the last several years following significant declines experienced since the beginning of the Canadian dairy supply management system. USDA is projecting the Canadian milk cow herd to finish flat throughout 2018, remaining at the record low levels experienced throughout 2016 and 2017.

Overall, the Canadian milk cow herd is equivalent to just over 10% of the total U.S. milk cow herd. When compared on a state-by-state basis, the Canadian milk cow herd is equivalent to approximately 55% of the California milk cow herd and 75% of the Wisconsin milk cow herd.

Because of the close proximity of the two countries, the U.S. has been the largest trade partner for both Canadian exports and imports of dairy products over the past several years. Canada has traditionally been a net importer of dairy products, despite heavy import tariffs, with the majority of import volumes originating from within the United States. Overall, Canada has historically been the third largest importer of U.S. dairy products over recent years, trailing only Mexico and China.

Throughout 2017, the U.S. accounted for over half of Canada’s dairy import volumes, significantly outpacing import volumes originating from within the EU-28 and New Zealand.

Canadian net dairy imports have traditionally been led by butter and cheese, while Canada has remained a net exporter of skim milk powder/nonfat dry milk. Canadian SMP/NFDM export volumes increased significantly throughout 2017, aided by the introduction of newly created class of milk. In Mar ’17, Canada created a Class 7 milk class to price products including protein concentrates, skim milk powder and whole milk powder. The newly created milk class is priced at the lower of skim milk powder or whole milk powder prices observed throughout major dairy exporting regions, effectively guaranteeing that Canadian product will always be competitive globally. USDA expects Canadian SMP/NFDM export volumes will continue to grow throughout 2018, breaking the record high levels reached throughout 2017.