Coronavirus: Why Canada dairy farmers are dumping milk

Dairy farmers in one of Canada's largest milk-producing province are poised to dump millions of litres of milk due to coronavirus.

Dairy Farmers of Ontario has told farmers to get rid of raw milk to keep prices stable and prevent oversupply.

The industry group says demand has crashed as restaurants and other bulk buyers shutter due to Covid-19.

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

The policy is a volte-face from last week, when Dairy Farms of Ontario, which oversees nearly a third of Canada's dairies, had asked farmers to increase production amid concerns about a shortage.

"In its 55-year history, Dairy Farmers of Ontario has only once before had to ask producers to dispose of raw milk," Cheryl Smith, the association's CEO, told BBC.

Canadian dairy is produced under what is known as a supply-management system, which strictly controls production quotas and imports to support prices.

At first, the industry co-op was concerned there would not be enough milk to meet demand, as Canadians panic-bought at the grocery store. But hoarding has died down, and the dairy frenzy has waned.

Meanwhile, bulk-buyers like restaurants, hotels and schools have been forced to close due to federal restrictions. That means there's milk on the shelves not being sold, risking a price plummet.

Dairy Farmers of Ontario is hoping that by spilling fresh milk, the supply will balance out and prices will remain stable. The group has not confirmed how much milk they are asking farmers to dump, but says it will be done on a "select and rotating" basis.

Producers told Ontario Farmer, a trade publication, that about 500 farms across the province have been asked to dump as much as five million litres a week. The province produces about 3 billion litres of milk a year, or about a third of Canada's total supply.

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

Dairy Farmers of Newfoundland and Labrador, another provincial dairy association, asked farmers to dump 170,000 litres last week. The province produces about 50 million litres a year.

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

Dairy farmers aren't the only industry struggling with how coronavirus has affected their supply and demand. Global oil prices have tanked with demand, as factories close down and air travel grinds to a halt.

But unlike dairy groups that have asked members to dump milk to keep prices stable, the Organization of the Petroleum Exporting Countries (OPEC) has decided to ramp up production. The move, spurred by a price war between Russia and Saudi Arabia, has pushed prices even lower.

The supply war has wrought havoc on another key Canadian industry- oil, based largely in the province of Alberta.