The facility’s first product will be Fairlife Ultrafiltered Milk, a lactose-free product billed as providing 50 per cent more protein and 50 per cent less sugar than traditional milk.

Canada is to be the first international market for Fairlife, a joint venture between the Coca-Cola Company and U.S. dairy farmer co-operative Select Milk Producers. The Fairlife product line will appear in Canada by the end of this year, the company said.

Coca-Cola Canada announced Tuesday it has budgeted $85 million for the new facility, which a company spokesperson said will be built adjacent to the company’s Minute Maid juice plant at Peterborough.

The company said it plans to work “closely” with Dairy Farmers of Ontario on the new operation, which is “scheduled to begin operations in the first quarter of 2020,” directly creating 35 jobs.

The new plant is to produce Fairlife milk in fat-free, two per cent (white and chocolate) and whole (3.25 per cent) in 1.5-litre bottles and two per cent (white and chocolate) in 240-mL bottles, for the Canadian market.

A Coca-Cola spokesperson said the company is “still in the early stages of design” on the dairy plant but expects the new facility and the Minute Maid plant to share a warehouse for shipping and “potentially” some existing infrastructure.

The Minute Maid plant makes frozen fruit juice concentrates for the Canadian market, employing about 100 people. No impacts are expected on Minute Maid operations during the dairy plant’s construction, the company said.

“Dairy farmers in Ontario look forward to working with processors, such as Coca-Cola Canada and Fairlife, to bring further innovation to our growing Canadian dairy industry, and are excited at the opportunity Fairlife presents to expand the dairy category and offer more variety to consumers,” DFO CEO Graham Lloyd said in the company’s release.

“Introducing Fairlife to the Canadian market presents a great opportunity to showcase Ontario dairy farmers’ high-quality milk and animal care practices, which pair well with the premium standards and passion for quality Fairlife is known for.”

“The decision to launch Fairlife in Canada was an easy one to make, given the high farming and dairy standards already in place,” Tim Doelman, the jpint venture’s chief operating officer, said Tuesday in a release.

“All of our products start with high-quality, great-tasting fresh milk, which is what Canadian dairy farms are dedicated to as well.”

Shane Grant, president of the Canadian business unit of the Coca-Cola Company, noted in the same release that the company has “launched an unprecedented number of new products into the Canadian market over the last 18 months” including brands such as Gold Peak, Smartwater, Glaceau fruitwater, Vitaminwater, Peace Tea and Powerade Zero, plus smaller package formats.

“Adding Fairlife Ultrafiltered Milk to our portfolio means we can offer Canadians more of what they are looking for — products with less sugar, more functional benefits and more natural ingredients.”

“Dairy farmers are true believers in innovation, which is why we are pleased to hear that a new product will be offered to Canadian consumers soon,” Dairy Farmers of Canada president Pierre Lampron said in a separate statement.

“We are pleased to hear the recognition of these companies to the Canadian model of high standards for quality and animal care as reasons that support their choice to use milk produced on Canadian farms to expand their product offering to Canada.”

Fairlife co-founder Sue McCloskey described the new Peterborough plant as an “exciting project that will lead to producing Fairlife using Canadian milk — from Canadian dairy farmers — and we’re honoured to be working with the Dairy Farmers of Ontario to make all this cool innovation happen.”

The Fairlife joint venture between Select Milk and Coca-Cola began in 2012, with Coca-Cola serving as the distribution partner for Fairlife products.

Sue and Mike McCloskey in 1994 founded Select Milk, which is now billed as the fifth-biggest dairy co-operative in the U.S., with almost 100 members in Texas, New Mexico and the Midwest and a “commitment to milk quality, animal care and environmental sustainability.”

All Fairlife products can all be traced back to the dairies their milk comes from, the company noted. — AGCanada.com Network

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Dairy Farmers of Canada’s (DFC) policy conference this week in Ottawa included a presentation by Don Mayo, global managing partner for IMI, an organization that measures media campaigns around the world.

Mayo is partway through a multi-year project to measure how well DFC campaigns reach consumers, and to present return on investment for marketing spending.

The results for the 2017 campaign were exceptional in brand awareness, although Mayo will need more campaigns in 2018 before he will be able to report on return on investment.

Milk is a strange outlier in the beverage market, as in Canada it doesn’t have one commercial brand, compared to other large beverage brands like Coke.

Here’s some of what Mayo’s research found:

• Milk ranked third in unaided awareness of brand advertising in surveys of consumers. That’s above Tim Horton’s, Apple and McDonald’s. Canadian Tire didn’t make the top 10 and neither did any of the banks, said Mayo.
• “There is no doubt it (the milk brand) has broken through,” Mayo said, but “there’s no guarantee it will be there next year.”
• Milk also comes in third in unaided memory of advertising in the beverage category after Coke and Pepsi.
• The 2017 milk campaigns included a cheese campaign about an animated father and daughter who make cheese, run digitally, and large national campaigns that included sports players pouring a “tall cold one” of milk, and several spots that played on the “crying over spilt milk” theme. There were also other initiatives that focused on nutrition, which performed well in surveys.
• DFC also introduced a new logo in 2017 that focused more on modern messaging, with a modern cow and new colouring that replaced an older logo with a cartoonish cow. Farmers were attached to what was known as the “little blue cow” but Mayo says the number of Canadians who remember seeing the logo rose from 45 per cent in 2016 to 70 per cent in 2017. The new logo and colour were heavily integrated into marketing campaigns and the number of companies using it has increased since the logo was modernized.
• Traditional advertising, especially on television, continues to perform significantly better than digital ads, which is what is being found across many campaigns. “You are beating the biggest beer brands in this race,” Mayo said.

David Janssens, a dairy farmer from British Columbia and a member of the DFC board, said promotion funds from his farm alone are $100,000. He expressed concern that funding for promotion is increasingly fractioned across the country.

“It is truly a serious issue,” he said. Dairy producers at the policy conference were going to discuss the issue in a closed session.

Budget changes

Ontario’s decision to pull out of national dairy product promotion continues to have repercussions for DFC and how Canadians will see dairy products.

The decision by Dairy Farmers of Ontario last June and in place January 2018, meant a delayed 2018 budget as DFC reworked its staffing and commitments based on the reality of losing $37.5 million in 2018 out of what was an $89 million budget in 2017.

A large proportion of the DFC budget goes to the national promotion and education campaigns that dairy farmers have undertaken for years.

DFC has also been in a period of fluctuation in staff with the departure of its executive director last summer as well as other staff. The organization hired Jacques Lefebvre as its new executive director in January.

Sorting out the new budgetary reality will continue with the 2019 budget, with a potential complete budget overhaul, said Sylvie LaRose, DFC’s director of finance.

Ontario’s concerns with marketing and promotion at DFC started about six years ago, said Dairy Farmers of Ontario board chair Ralph Dietrich, a DFC board member. There was an increase in promotion fees to producers at that time.

“There were questions on this from the producers’ perspective,” Dietrich said. “They agreed with it, but conditionally, and one of the conditions was to see how the money was being spent and what is the return on the investments.”

The request for that information was made, but “unfortunately we did get what was required. We needed it as a board to pass it on to producers who were asking us for it.”

The lines of communication remain open and Ontario will continue to work with DFC on some promotion projects. DFO has expressed strong support for the rest of DFC’s mandate.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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What does it mean? Dairy Farmers of Ontario’s withdrawal from national marketing of milk has meant upheaval at Dairy Farmers of Canada’s marketing department. It will mean less large-scale advertising of milk, especially fluid milk, and little advertising in Ontario until Ontario’s program is up and running.

Dairy Farmers of Ontario’s (DFO) board gave notice in June that it would no longer remit marketing funds, starting Jan. 1, 2018, to Dairy Farmers of Canada’s large marketing department, based in Montreal.

DFO asked DFC to prove return on the more than $40 million investment Ontario farmers make in consumer milk marketing.

“We were not able to obtain this information from DFC in a way that met our objectives,” DFO CEO Graham Lloyd said, adding that the board of directors has said it will not move quickly until it is sure of its future direction.

The board has appointed a group of dairy market experts and has started a search for a director of market development.

The expert group reported some recommendations in December, Lloyd said, including that DFO should support pre-competition dairy ads — meaning supporting milk product consumption in general.

There’s also a need to work directly with partners in retail and food services before promotions are created, and to develop a capital investment program to help reduce barriers to funding of programs.

The last recommendation was to continue community investment.

Programs that are likely to be continued include the milk calendar, the elementary school milk program and provincial- and community-level programs and sponsorships, Lloyd said.

Stakeholders a priority

DFO has already met with the Dairy Processors Association of Canada and the Ontario Dairy Council, he said. “We want to be their partner.

“The goal has to be with all of the programs, with some exceptions, is to increase demand for Canadian milk and dairy components,” he said, reiterating concerns the DFO board had with the national marketing programs.

Dairy farmers in the province will be out of dairy marketing to consumers for a period of time, and some farmers at the DFO annual meeting questioned whether consumers will still see the type of advertising they were used to.

“It won’t be in all fancy ads,” Lloyd said. “We will be using data for certain to identify what markets are growing. We own that data, so let’s use it.”

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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DFO chair Ralph Dietrich told the organization’s annual meeting that new processing capacity coming online this year will help drive the continued increase in quota allocated to meet the demand.

The six per cent is in addition to 10 per cent in the past year and more than 20 per cent over the past three years.

The increase will not be coming soon, however, as the P5 quota committee — made up of representatives of the five largest eastern Canada milk-producing provinces — said after its meeting Jan. 11-12 that there wasn’t enough information yet to announce an increase in quota.

The growth in milk demand has occurred since the implementation of a new class of milk, Class 7, priced to compete with imports. The growth in milk has resulted in a building boom for dairy farms, with farmers having to wait about two years before they can get a barn built.

The challenge for dairy farmers is that the price they are paid for Class 7 milk is lower than other classes, meaning the overall blend price of milk has been trending lower.

“We know we need more milk in the system because of processing plants being built,” said Dietrich, including a baby formula plant being built by a Chinese company.

There have been hundreds of millions of dollars in investment in dairy processing announced in Canada over the past year, including to dry skim milk into powder. Dietrich said he’s expecting another announcement in January from Agropur in Eastern Canada about more new processing construction.

Continuing to grow the milk supply as it is needed is the farmers’ part in the supply management deal.

“Our system works best when we can get right amount of milk to the right place at the right time,” said Dietrich. “This is the essence of the Canadian dairy system. Producers, processors and consumers all win.”

So far, farmers have delivered on the needed milk, but balancing the market is an ongoing challenge. Unlike an assembly line where you can step up production quickly when needed, adding more cows can be a two-year process, although a lot of farmers buy cows when needed. If new facilities are needed, it can take a couple of years to get them built.

That’s why there is more emphasis on letting producers know when milk will be needed longer-term.

“What we want to do is give as much, and as soon as we can, direction to farmers as to what will be needed and when,” said Dietrich during an interview.

The P5 — the five eastern provinces, which have a common milk pool — discussed this issue at a recent meeting.

“Something Quebec has done and Ontario and the P5 are doing is to get a handle on what the potential is for increased production among our producers,” said Dietrich. “It’s a good worry to have.”

As some farmers have had their quota holdings grow, but aren’t interested in, or able to fill that quota, and other dairy farmers still look for more quota, there’s more talk about whether it makes sense for some farmers to be able to share their unused quota, usually in the form of a lease.

Many dairy farmers are selling their extra quota on the quota exchange, but others might like to be able to keep access to their quota in case they need it in the future. Dietrich says over the past several months there have been more than 100 producers on the Ontario quota exchange selling portions of their quota.

“The word ‘leasing’ has come up in discussions. The P5 quota committee is looking at ways they can somehow get the quota in the hands of the producers who can fill it. Despite the fact we’re short of milk, we still have producers who have too much milk (for their quota holdings).”

Policy changes, such as leasing, will have to go back to producers, he said, and he expects the organization’s spring policy meetings will have leasing as a discussion topic.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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It will also be implemented quickly, on July 1.

The five provinces — Prince Edward Island, New Brunswick, Nova Scotia, Quebec and Ontario — create quota policy collectively, referred to as P5.

According to Kristin Benke, economist with Dairy Farmers of Ontario, between August 2016 and July 2017, there has been an increase of 12 per cent in quota issued by the P5, including one per cent in August, one per cent in September, three per cent in November, two per cent in December and now five per cent in July.

According to a statement from Dairy Farmers of Ontario and the P5, the increase is needed as there still isn’t enough milk produced to fill the market for butter.

“This decision is intended to ensure P5 milk production continues to fill all current demand, as butter stocks have not surpassed their updated target level of 35,000 tonnes.

“Demand for dairy products continues to be strong while P5 processing capacity has increased since the beginning of April but continues to be closely monitored.”

As butter demand has increased, there’s been an increasing amount of skim milk left, after the butter fat has been removed to make butter and other products.

Without adequate processing for that skim milk, it has become a waste product, sold to feed markets or disposed of.

Increasing investment in processing should take care of some of that excess skim milk powder with the creation of protein isolates.

A new class of milk in Ontario was implemented last spring, called Class 6. It lowered the price of milk to be used to make milk protein isolates in order to compete with imported American milk protein isolate products.

The rest of the country has since followed suit in creating similar pricing, called Class 7, but it is still under discussion.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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Graham Lloyd, the organization’s general counsel, secretary to the board and director of communications, is the new general manager, replacing Peter Gould, the organization’s long-time manager.

Gould, trained as an economist, has been with DFO since 1981 and has been the general manager since 2005. He is due to retire July 31 at which time Lloyd will take over as general manager.

Lloyd has been with DFO since 2011, taking on successively more responsible roles.

“We have been reminded by our government contacts, industry partners, and our processor community of how valuable he has become to the industry at large,” said DFO board chair Ralph Dietrich.

“Anyone that has worked with Graham will know his incredible passion for the industry, his desire to protect the interests of dairy producers, and his drive for results.”

Lloyd is known as a relentless defender of the supply management system and was also involved in the development of a provincial milk ingredients strategy.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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There are almost certainly more quota increases to come, in order to increase milk production to displace significant volumes of butter now being imported.

“It’s an absolutely great time to be a dairy farmer,” Ralph Dietrich, chair of Dairy Farmers of Ontario (DFO), told the organization during its annual meeting held Wednesday and Thursday in Toronto. “We’re lucky to be in an industry like this at this point in time.”

That’s despite a perception of doom and gloom in supply-managed sectors over impending trade agreements such as the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), which DFO general manager Peter Gould put in perspective at the meeting.

The erosion of tariff rate quotas (TRQs) under the CETA agreement will mean about 17,000 tonnes of EU cheese will be allowed into Canada over five years. That’s equivalent to about two per cent of national quota.

Supplemental import permits for butter for 2017 alone are expected to be about 12,000 tonnes — about three per cent of national quota. That butter should all eventually be covered by quota increases and produced in Canada.

The optimistic tone at the meeting comes from a storm of decision-making and renewed consumer confidence in dairy products over the past year, unlike any seen in the history of supply management — and Ontario was in the middle of it.

Ingredient strategy a game-changer

Specifically, the past year saw a strategy developed that reduced the price of milk used to make dairy ingredients in Ontario, in response to a growing mountain of non-fat solids (SNF) with few markets other than giveaway-grade animal feed.

At the same time, ironically, more highly-processed, inexpensive milk protein isolates were being imported.

Without a competitive Canadian supply of milk to use in ingredients, processors have had little impetus to invest in Canada’s aging dryer facilities, which process skim milk powder into a form that can be used to create milk protein isolates.

Dairy farmers had been working since at least 2006 to develop a national ingredients strategy, but that “just didn’t get done,” said Gould, who criticized the number of people involved in trying to negotiate the strategy — about 40 — as “too many.”

Ontario decided in late 2015 to go ahead with its own ingredients strategy, implemented in April 2016. Ontario’s board of directors was criticized from across the country, but stood firm.

By late spring, Manitoba also came on board with an ingredients strategy. The province was in a crisis with a lack of processing capacity. Quota was being reduced to farms and milk was being transported to British Columbia and Quebec.

SaskMilk also came on board, and together the groups forced national negotiations to come to a fairly quick agreement on a national ingredients strategy in July — something many people had said was impossible.

The national strategy has seen several delays in implementation since then, missing August and November deadlines. It is expected to be implemented next month, Gould said.

The ingredients strategy has resulted in a drop in the blend price  — what farmers are paid for certain classes of milk, meaning less income to farmers — although that price improved in late 2016.

The strategy has also secured three significant investments by Canadian processors. Those include a Vitalus-Gay Lea joint venture to make milk ingredients and butter in Winnipeg; an investment by Parmalat in its Winchester, Ont. plant; and a $140 million investment by Gay Lea in processing in Ontario — including a dryer at its Teeswater, Ont. plant.

Both Gould and Dietrich called the ingredients strategy the most significant change for supply management since its creation.

A renewal of demand for dairy products has also helped, stemming from research that showed higher-fat products didn’t have the detrimental health effects previously identified in now-debunked studies.

DFO received support from the Ontario Farm Products Marketing Commission (which regulates marketing boards), provincial Agriculture Minister Jeff Leal and the Dairy Processors Association of Canada. Gould said.

The processors’ association, he added, has given its new CEO Jacques Lefebvre a new and helpful mandate.

Ontario producers, Gould said, were expected in other provinces to rebel against the ingredients strategy — but they did not and in fact were generally supportive of the DFO board.

“There has been a significant measure of conflict, which is not necessarily a bad thing when you end up with a result like the national ingredients strategy, which is an amazing outcome.

“What we’ve done is significant. We brought a commercial solution to an otherwise intransigent problem.”

The ingredients strategy could still face trade action from the U.S., where politicians, particularly in New York state, are already agitating against it.

Challenges with growth

The transition from a legacy industry to one with new investment and momentum will also create new challenges, said Gould, who retires from DFO this year after 36 years with the organization.

The largest such challenge will be how to move the dairy industry from a culture of scrambling to maintain scale, resulting in farm size stagnation, to one where there is the opportunity of growth, and indeed, under supply management, the obligation to supply the market.

That will mean significant choices for farmers, especially those in Ontario and Quebec, where older barns — mostly tie stalls, with limited ability for growth — will be challenged to fill new quota.

The sector does not want to have unfilled market demand, as farmers without the ability to fill new quota sit on 15 or 20 per cent unfilled quota that could be used by other farmers.

“The No. 1 challenge is how to keep up on the production side,” said Gould. “There are literally thousands of dairy farms facing big decisions about whether to expand, rebuild or not.”

That will require “serious dialogue,” Gould said, but questioned whether there’s a venue for such dialogue to take place.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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The immediate crisis, according to Jan Slomp, a Vancouver Island dairy farmer and president of the National Farmers Union, is diafiltered milk.

The U.S. has long been able to export the powdered protein product into Canada tariff-free, since it’s considered a “protein substance” for customs purposes but is considered “milk” for dairy processing purposes by the Canadian Food Inspection Agency.

“They are circumventing the tariff wall in a very sophisticated way, a very dirty way, if you ask me,” Slomp said. “Private processors (in Canada) add it in their cheese fat and get way higher yields from the same amount of product for a very low price… It costs Canadian producers volume of production.”

Canadian dairy farmers are currently struggling with a surplus of skim milk powder, Slomp said, due to a shift toward consuming more butterfat and less milk.

Instead of buying skim milk powder from Canadian dairy farmers, processors are choosing the cheaper option, helping the U.S. reduce its surplus of skim milk powder in the form of diafiltered milk and adding to Canada’s.

“It’s putting tremendous pressure on our system,” Slomp said.

The federal government has held consultations with producers, processors and regional agricultural associations from across the country to identify measures for a long-term solution, federal Agriculture Minister Lawrence MacAulay said via email.

“The government of Canada is aware of industry’s concerns regarding the use of diafiltered milk,” MacAulay said. “Consultations have been productive and constructive, and (we) remain attentive to the needs of industry.”

Cheese compositional standards also ensure a minimum percentage of diafiltered milk is used in the making of cheese, MacAulay added.

Dairy Farmers of Ontario has proposed the government subsidize equipment so they can produce diafiltered milk and compete with the cheap imports, Slomp said, adding it’s a proposal with which dairy farmers across Canada disagree.

“The only reason (diafiltered milk) was invented was to circumvent the tariff wall… there is absolutely no need to create it,” Slomp said. “It would make trade a holy cow with no purpose.”

Slomp said the government may be taking steps to support dairy farmers, but it’s not enough.

“They want to promote trade, but this isn’t about trade… it’s defending a very legitimate sector of Canadian agriculture and it would be very fair for (the Canadian government) to be blunt about not allowing this product to come into Canada.”

— Erin DeBooy writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow her at @ErinDeBooy on Twitter.

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A letter to producers last Friday from Dairy Farmers of Ontario board chairman Ralph Dietrich, intended to “put to rest the rumour” that DFO was being forced to dump raw milk, instead wound up as a lead story this week at the Globe and Mail as it detailed the circumstances leading to skim milk dumping.

DFO, in a separate release Monday, emphasized the product being dumped is a livestock feed-grade byproduct of the demand for butterfat and “if there was excess product to feed people in need, we would provide it.”

Total dairy demand has been strong “for the better part of two years,” Dietrich wrote in last Friday’s letter to farmers, but most of that growth has been in products such as butter, creams, cheese and yogurt.

“The weakest segment of the market is fluid milk, although the trend to lower-butterfat milk seems to have been reversed.”

The result has been “unprecedented” growth in all-milk quota, by 6.5 per cent in just over a year, and “the issuance of incentive days,” said Dietrich, who farms at Mildmay, about 90 km northwest of Guelph.

However, he wrote, “we are currently testing the limits of system capacity, with the limiting factor being the amount of skim milk that can be dried into skim milk powder.”

DFO’s board, he said, has thus been “challenged to market all the milk every day.” However, he added, some plants are able to separate the milk without generating more powder.

Thus, he said, “there have been days in the last couple of weeks when we have had to dispose of skim milk in lagoons… That is obviously not an ideal situation but better than the alternative. There is still a need to make more butter and I don’t see that changing.”

The Globe’s Barrie McKenna on Friday quoted DFO’s communications director Graham Lloyd as saying Ontario farmers have produced 5.4 million litres of excess skim in the past month, and roughly 800,000 litres — worth about $500,000 as livestock feed — have instead gone into farm lagoons since late May.

A “similar situation exists in all parts of the country,” Dietrich said in his letter, noting “there have been days when Ontario has been able to move some milk into Quebec and some days when Ontario has been able to help Quebec.”

Today, however, “we continue to be challenged on a daily basis and there is no obvious end in sight, unless the normal seasonal production trend kicks in or there is a prolonged hot spell.”

Dairy Farmers of Manitoba chairman David Wiens, for another example, told the Manitoba Co-operator’s Shannon VanRaes last month that the province’s dairy sector, strained by both increased demand for dairy and limited processing capacity, has had to ship 75,000 lites of milk west each day.

Part of the challenge was dairy giant Saputo’s move to shut its processing plant in Winkler, while expansions at the company’s Brandon site have faced delays, Wiens said.

Saskatoon processors who’ve handled the Manitoba surplus are now themselves at capacity, he added, leading to a situation where “potentially milk will cascade throughout the provinces right through to Abbotsford (B.C.).”

McKenna on Friday also quoted an internal DFO report, which warned of rising imports of “designer” milk protein ingredients from the U.S. and elsewhere, replacing fluid milk in the making of cheese, yogurt and other goods.

“If milk protein imports continue to grow, the industry will no longer be able to sustain itself as there will be no market for the (skim)… leaving the industry no choice but to dump skim milk or import more butter.”

Critics quoted by the Globe blamed Canada’s supply-managed dairy system for producing such surpluses, but DFO emphasized in its release Friday farmers “are producing the right quantity of milk” for Canada’s needs and suggestions to the contrary are “simply not accurate.”

International dairy values have also fallen in recent months, with average milk powder selling prices dropping Tuesday to US$2,409 per tonne, their lowest level since August 2009, Reuters reported.

“It will become harder for prices to recover as the volume of milk powder on offer increases as the new dairy season progresses,” analysts for New Zealand-based AgriHQ said in a note Reuters quoted Wednesday. — AGCanada.com Network

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Organic Meadow Co-operative announced Monday it had filed for creditor protection “in order to complete a restructuring of its operations.”

The company said its hand was forced by “onerous business terms recently placed upon it” by Dairy Farmers of Ontario, the provincial milk marketing agency.

DFO, in documents filed Tuesday by MNP as Organic Meadow’s insolvency trustee, is listed as an unsecured creditor of Organic Meadow Ltd., owed $850,000.

In a separate statement Monday, DFO said it “had been working with Organic Meadow for a substantial period of time in an effort to assist it with growing its market” but “must also ensure Ontario farmers receive compensation for the milk they produce and sell.”

While the amount owing is unsecured, DFO said it “will ensure that the organic producers are paid for the milk that DFO delivered” and will dip into its bad debt protection fund to cover those payments if need be.

Neither Organic Meadow nor DFO said in their statements what specific terms had changed in their business arrangement. Organic Meadow CEO Don Rees, in the company’s release, said the protection filing “is about protecting the earned rights of the founding farmers of the organic dairy category in Ontario.”

The company, he said, plans to “work with the milk marketing board and all of our creditors to put a restructuring plan in place that allows us to emerge from this process stronger, and which allows us to work with (DFO) in growing the organic milk market we started in 1989.”

“Impossible hurdles”

The co-op’s dairy farmer members are all “disappointed that we could not find a resolution which would have enabled the co-operative to continue conducting business without the need for creditor protection,” co-operative vice-chairman and organic dairyman Ted Minten said in the same release.

Organic Meadow’s “new business model was beginning to significantly improve our results and we were well along a process to bring in a new investor group,” he said.

However, “substantial milk allocation shortfalls in the December-to-February period and the change to business terms by our largest vendor were impossible hurdles for us to overcome.”

However, Minten said, the company will continue to operate as usual during the restructuring process, and DFO said it “has arranged to supply milk (to Organic Meadow) during the restructuring process.”

Organic Meadow Ltd.’s other major listed creditors include RBC Royal Bank, owed $1.4 million; Ontario dairy firm Elite Dairy, owed over $224,000; Lac-Megantic, Que.-based cheese firm Fromages La Chaudiere, owed over $183,000; and dairy giant Saputo, owed over $129,000.

Another related company, Organic Meadow, Inc., is in protection under the same filing and is listed as owing $9.3 million to an arm of Calgary-based Avrio Capital and $3.21 million to Farm Credit Canada.

Also under the same filing, Organic Meadow Co-operative Inc. is listed as owing almost $700,000 by way of over three dozen “member loans” from parties including individual farmers, farm corporations and Amish colonies, in amounts ranging between $5,000 and $100,000 per loan.

Organic Meadow Inc. is also listed as owing $2.43 million to Organic Meadow Co-operative, while Organic Meadow Ltd. is listed as owing $3.1 million to Organic Meadow Inc. — AGCanada.com Network

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