GREENWOOD, Wis. — A change in dairy-related policies in Canada has led a Wisconsin-based milk processor to cancel contracts with dozens of dairies in two states.

 

The 67 dairies – 58 in Wisconsin and nine in Minnesota – were hit directly by the announcement from Grassland Dairy Products, said John Pagel, president of the Dairy Business Milk Marketing Cooperative, based in Wisconsin.

 

“Indirectly, almost everybody in the industry could be affected,” he explained. “With the shape the industry is in now, other processing plants might change their policies and premium levels. At this time, that milk can’t go anywhere because plants are full.”

 

At issue is ultra-filtered – or concentrated liquid – milk. Canada has created a Class 7 milk designation and changed its pricing policies for the product, Pagel said. The result of the changes is a higher cost in Canada for U.S.-produced milk products.

 

That the change was coming wasn’t news to U.S. dairy producers but the timing was, he explained. “We heard about it in January but thought it wouldn’t happen for six months,”  Pagel said. “Canada really just gave them (Grassland) a couple of days’ notice.”

 

Grassland told producers on April 1 the company would no longer accept their milk, beginning May 1. In a letter to dairy farmers, Grassland said a part of its business has been the long-term sale of milk products to the Canadian market.

 

“The Canadian government has put in place several regulations to prevent this trade from continuing,” the letter said. “As a consequence of this severe loss, Grassland is now forced to cut back on our milk intake volumes on very short notice due to not being able to process milk on lines dedicated to our Canadian customers.

 

“We appreciate your business over the last several years and regret that (Canada’s) decision has made such a severe impact on Grassland’s and your business.”

 

Grassland makes butter and dairy ingredients such as concentrates and powders.

 

The Dairy Farmers of Canada said it’s wrong to blame the country for a situation in the United States. Class 7 is a domestic policy and doesn’t block imports or restrict American access to the Canadian market, the organization said.

 

“We know that dairy producers in the U.S. are going through tough times; however, incorrectly laying the blame on an unrelated Canadian domestic policy will not improve their situation,” the group stated.

 

Some New York dairy farmers were also impacted by the change in Canadian policy. In an April 7 letter to Michael Young, acting USDA deputy secretary, Wisconsin and New York officials asked for help from the agency.

 

“We urge USDA to assist us in our efforts to help our producers by exercising its authority to purchase cheese and butter in storage and distribute it through USDA’s nutritional aid programs, including food banks and our national school programs,” read the letter from Ben Brancel, secretary of Wisconsin’s Department of Agriculture, Trade and Consumer Protection,  and Richard Ball, commissioner of New York’s Department of Agriculture and Markets.

 

Pagel said he doesn’t expect many dairy farmers to go out of business as a result of the situation. “There may be some, maybe if you have a 62-year-old with no family members to eventually take over, who decide to sell their cows and rent their land out. But we’re doing everything we can to help farmers and allow the industry to solve the problem.”

 

The Dairy Farmers of America said it is evaluating supply and demand in the area to see if there are opportunities for it to help some of the farmers impacted by the situation.