2024 Dairy outlook update: a turnaround year for producers

A string of positive events has occurred this year for the dairy industry, which is a welcome relief to producers who have recently, on the whole, endured multiple tighter-than-normal years. Simply put, there is optimism in the industry today that has not existed for some time.

Primarily as a result of lower-than-expected feed costs, due to favourable weather and strong production south of the border, our gross margin estimates for both the P5 (eastern Canada) and WMP (western Canada) have improved since our original forecast in February (Table 1).

Table 1: Changes in estimates of average gross dairy margins ($/hl), 2024*



*The calculations use different definitions of cost categories for the P5 and WMP and therefore values are not directly comparable.

**Income is primarily the milk price but also includes net cattle sales, inventory adjustments and miscellaneous receipts.

***Gross margin is total revenue less variable costs and feed. Fixed costs and return to management are excluded from the calculation. We do not include fixed costs as these vary greatly between operations.

Sources: Statistics Canada, Canadian Dairy Commission, Government of Alberta, FCC Economics

Demand for dairy products surges

In our February outlook we highlighted the reasons we believed multiple incentive day announcements were likely forthcoming in 2024. This has certainly turned out to be the case. In the P5, 11 incentive days were granted (or are currently planned) this year. Even P5 organic producers – who, by our count, haven’t had an incentive day since December 2022 – have been allocated eight incentive days this fall. Producers in the P5 also received a 1% quota increase effective September 1. In the WMP, there have been seven incentive days announced for the year alongside a 2% quota increase effective September 1. This is in addition to the quota increases that took effect in February earlier this year.

These levers being pulled to increase production are a result of strong consumer demand (Table 2). Our dairy product manufacturing outlook forecasts strong growth in the production of dairy products this year, and to-date sales have been strong. Indeed, when adjusting for inflation, sales of Canadian-produced dairy products are on pace to be the highest in over a decade. Consumption across all major dairy product types is up year-to-date, led by growth in cheese and butter.

Table 2: Changes in consumption by product, 2024 and 2023, year-to-date*

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