Dairy Industry

Saskatchewan's dairy industry evolved from its early beginnings during the settlement of the province to its current form and structure as a significant sector within the agricultural economy. The development of the Saskatchewan dairy industry was an integral part of national settlement policy aimed at diversifying and stabilizing prairie agriculture, which was highly dependent on volatile grain markets. In Saskatchewan, early attempts to establish a viable dairy industry met with considerable success (although below initial expectations) through a government development program consisting of loans and other incentives to build plants and market butter and cheese, with milk supplied by local farmers. In spite of the many challenges facing the industry, dairy production expanded and prospered. At its peak, it represented an important aspect of early farm production and diversification, with about 100,000 farmers shipping cream and milk to numerous processing plants located throughout rural Saskatchewan for manufacturing into fluid milk products and butter.

The Saskatchewan dairy industry has undergone dramatic change due to technological improvements and market trends. No longer is cream shipped in cans by rail by thousands of producers to processing plants. Innovations such as refrigeration, pasteurization and bulk handling have greatly impacted on industry productivity and structure. Today, milk is produced on about 300 large, specialized dairy farms and delivered by bulk tankers to one large processing plant which produces fluid milk, yogurt and cheeses for the western regional and national markets. Throughout the production/ transportation/processing chain, the most advanced technical and sanitary practices are employed to ensure consumers receive a high-quality product.

While the dairy farms have decreased in number, the volume and value of milk and milk products continue to grow. Average herd size in 2003 stood at 85 cows per farm, with productivity per cow increasing almost threefold over the last half-century, owing largely to improved housing, feeding, and breeding practices. Producers now market over 210 million litres of milk annually, valued at $130 million. The Saskatchewan dairy industry makes a significant contribution to the provincial economy in terms of value-added processing and job creation, ranking third behind beef and hog production.

The dairy industry has undergone a major shift in the products manufactured, in response to changing consumer attitudes and product demand. The trend to consuming lower fat in diets has resulted in a shift to dairy products with high protein/low fat content. Demand for fluid products has shifted from regular homogenized milk to lower fat and flavoured milk options. Growth in demand is strong for high-value products such as various cheese varieties (4-5% annually) and for yogurt (9-10% annually). On the other hand, the demand for butter is flat because of its high fat content and strong competition from vegetable oil-based alternatives.

Product quality is maintained at a high standard by the enforcement of various health and sanitary regulations applied at the producer, processor, and retail levels of the industry. At the provincial level, production and marketing are governed by regulations under the Animal Products and Public Health Acts. At the national level, regulations under the Food and Drug Act set out the definitions for various dairy products and measures to safeguard consumer interests. All milk destined for processing is tested for antibiotics before entering the plant. If a load tests positive, it is automatically rejected. In addition, all milk entering the plant is first pasteurized before processing into any end-use product. At the Provincial Dairy Laboratory, producer milk samples undergo comprehensive testing for bacteria and other contaminants, as well as analysis of milk components (butterfat, protein, and other solids). The component analysis provides the information required for producer payments.

Producers and governments addressed the need to improve industry stability by creating a national orderly marketing and supply management system for milk. A milestone agreement among the provinces and the federal government was the formation of the National Milk Marketing Plan (1984). This agreement provided producers with countervailing power in the market for milk to balance the growing concentration of market power in the hands of national and multinational processors and grocery chains. Under this agreement, national quotas were established at levels to serve market needs, and prices were set for various classes of dairy products. The Canadian Dairy Commission is responsible for marketing milk used for industrial (processing) purposes, while the provincial marketing boards were made responsible for allocating quotas to producers within their boundaries, and for the marketing of milk used for fluid purposes (milk and cream). In Saskatchewan, the Milk Control Board is responsible for managing the milk supply through a system of quota allocations to producers, and for the transportation, pricing and marketing of all milk produced under the supply management system. The Board works closely with the CDC and other provincial boards in managing the system on a national basis to ensure that market needs are met, and that consumers receive high-quality products at reasonable prices.

Pooling of revenues generated from the sale of milk used in various dairy products is a very important aspect of the orderly marketing structure established to maintain industry stability. Milk used for processed products serves a national market. Milk revenues from this source are pooled nationally, and administered by the Canadian Dairy Commission. Until recently, fluid product revenues were pooled and administered by each provincial marketing board in their respective jurisdictions. In response to changing processing circumstances, it was in the interest of producers to broaden the market for fluid milk products and to establish two regional milk pools: in 1997, the Western Milk Pool and the P5 Pool (in central and eastern Canada) were created to better serve the needs of both processors and consumers. These regional pools established common prices for all milk and milk products marketed with the regional revenues pooled and distributed among all producers on a common basis, regardless of location and product produced. Dairy producers had the opportunity to participate in provincial and national agriculture policy development through the Dairy Farmers of Canada, a producer-funded advocacy organization, and through the Dairy Farmers of Saskatchewan at the provincial level. Both organizations are also heavily involved in promoting milk and milk products to various consumer groups. (See also Dairy Farming)

Gerald Gartner

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Further Reading

Church, G.C. 1985. An Unfailing Faith: A History of the Saskatchewan Dairy Industry. Regina: Canadian Plains Research Center.