42nd Annual Report

Dairy Farmers of OntarioJanuary 9, 2008

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ProductionIn October 2007, there were 4,511 licenced dairy farms which equates to about 9,500 dairy farm families in Ontario217 new producers entered the industry

11 same-site locations32 new operations174 ownership changes

Total milk production was 2.464 billion lButterfat and protein levels decreased while other solids levels remained constant compared to the previous year

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Quota Credit Days

0

1

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Nov Dec Jan Mar Apr May Jun Jul Aug Sep Oct

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Quota and Quota PoliciesOver-quota charges were adjusted Feb. 1 to $72.61Zero payment policy for SNF in excess of SNF:BF ratio of 2.35 remained in effect 1,107 producers were impacted for the dairy year, with zero payment on 1.426 million kgs of SNF, representing $5.349 million

New policies in Nov.Transfer assessment10 kg exemptionPay what you bidLetters of direction

Pay What You Bid Fund$4.3 million collectedUses – transportation account, school milk, Dairy Education, truck wraps, ethnic markets, governance audit and media relations

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Quota Transfers

8.47 % of provincial quota transferred among producers during the year:

5.96 % between immediate family2.50 % over the quota exchange 0.28 % with on-going farm operations

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Milk Production and Market Requirements

Industrial milk market requirements for 2006-2007 dairy year increased by 4.9 %All-milk quota increased by 3.9 % during the year

+ 0.7 Feb 1+ 1.2 Apr 1+ 1.0 Aug 1+ 1.0 Oct 1

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Special Class Pooling – P10

Special classes provide processors & manufacturers with competitive priced milkOntario produced 100.03 % of its quota in the 2006-2007 dairy yearSNF/BF target not reached in Ontario for 2006-2007 dairy yearOntario has a new target of 2.2927MSQ adjustments amounted to 5.5 % over the year

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P-5 All-Milk PoolingNewfoundland and Labrador remained as an observer at P5Milk allocation discussions between ON & QC made progressSpecial promotion program for chocolate and flavoured milks & milkshakes in sizes less than 750 ml launched in Spring 2007Two P5 Producer Forums held during the fiscal year, giving direction to proceed with development of a governance structure – however, there was little support for going this route at this time, but the GMs are asked to examine further harmonization opportunitiesTransportation continues to be pooled across the P5 with Ontario receiving a credit of $2.6 millionMilk supplies moved between provinces according to the pooling agreementP5 promotion fee increased by 4 cents to $1.30 per hl effective Feb 1, 2007

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Trade DevelopmentsWTO negotiations struggled in 2007Some activity in May and JuneA new draft tabled in July that drew much criticism from several countriesWhile negotiations resumed again in Sep little progress was achievedExpectation is now 2009 for a dealSM commodities continue to work with both the federal and provincial governments to ensure their commitment to supply management remains firm

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Raw Milk Quality ProgramDFO was given the authority to administer and enforce raw milk quality regulations in 1998DFO’s Director of Production, George MacNaughton, is the current Director of Regulatory Compliance

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Quality Penalty Program

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Canadian Quality Milk Program

Four key componentsStandard Operating ProceduresTime Temperature RecordersWater QualityLivestock Medicines

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Other Quality MattersRegulatory changes are required for the CQM program and are expected to be made soonFees now charged for 2nd and subsequent follow up Non-Grade A visitsInitial Grade A inspections on 2,373 farms16 test challenges considered by the Director of Regulatory ComplianceDFO & ODC received approval to tender for the provision of composition sample collection and testing separately from quality

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Udder Health ManagementContinued to be offered on a fee basis179 farm visits and 20 presentations Program has a goal of 75 % cost recovery

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Animal Care and Environment

DFO continued to support OFACNo ‘Help Line’ calls on dairy last yearDFO participates with observer status at Livestock and Poultry CouncilConsultant used to assist on Nutrient Management and Clean Water Act issues

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Quality Recognition Program 289 producers qualified for the Gold Certificate1,287 producers qualified for the General Certificate

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TransportationAt year end:

59 transporters226 trucks

Costs rose slightly as a result of more milk being transportedProducer transportation charge changed to reflect actual monthly costs“Pay what you bid” funds were used to pay off the deficit

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Other Transportation Highlights

Transporters paid on a fix rate/hl as of Jan 07Reduction in # of smaller trucks continuesHand-held computer update for transporters completedPayment for reduced agitation time resulted in an Appeal

Trailer graphics used to promote milk and milk products5 truck-tank inspection sites in place320 farm bulk tanks calibrated37 new bulk tank milk grader certificates issued and 82 renewed during the yearProducers appreciate excellent service provided by milk transporters

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Milk Processing

DFO marketed milk to 72 plants:20 fluid and 56 industrial

52 organic producers supplied ~ 18 million litres of milk for various organic dairy productsExtra credit days provided to organic producers to help meet the growing demandNew “Organic Milk Marketing Policy”developed

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Other Niche Marketing Activities

Omega-3 DHA milk produced in 21 herds from cows fed a specialized feeding programArtisan Cheese Program introducedDomestic Dairy Product Innovation Program (DDPIP) encourages new and innovative dairy productsUltra Kosher processing commenced during the year

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Milk Donations

Food Bank donations totaled 1.2 million litres from 411 producers Donations are delivered to 100 Ontario Food BanksTransporters and processors are also important partners in this program

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Milk PricingFluid and industrial prices were increased effective February 1, 2007

Fluid $3.63/hl and Industrial $0.78/hlAverage within-quota price paid to Ontario producers at average composition for Class 1 to 5 milk was $72.48/hl for dairy yearThis compared to a price of $70.49 for the previous year

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Producer Deductions ($/hl) 2005 2006 2007

Admin Fees Research Market Expansion Ontario DHI Total Deductions

0.45 0.04 1.22 0.06

1.77

0.47 0.04 1.26 0.06

1.83

0.47 0.04 1.30 0.06

1.87

Actual Admin Costs

0.548 0.581 0.536

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CommunicationsWTO negotiationsQuota policy changesMilk suppliesMilk pricingClean Water ActCanada’s Food GuideCheese standardsDIWGOntario election

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CommunicationsProducer communication vehicles include:

the Milk Producer;Dairy Farmer Update; and, PipelineMILKLINEWeb site

The Milk Producer circulation continued to expand beyond Ontario

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DFO Web siteIt provides quality, composition, monthly milk statement, pick-up history, inspection reports for individual producer accessQuota Exchange Industry news update

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Communication ProgramsGovernment Relations

Build relationshipsGarner support for supply managementAddress issues of importance to our industryLobby days in Toronto and Ottawa

Involves Ontario SM5 group working together WTO, election and liaison with OMAFRA were key elements

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Dairy Education Program

Provincial, Regional and County Dairy Education programs continue to reach increasing number of elementary school students.

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Dairy Farmers of Ontario

Our Mission is…..“to provide leadership and excellence in the production and marketing of milk”

Our Vision is ….. “a dynamic profitable growing dairy industry”

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Research

Nine new projects initiated in 2007 with major emphasis on opportunities for growing marketsOther projects include a research chair, grants-in-aid program and a doctoral research assistantship programThe Milk Producer continues to play an important role in communicating research results in collaboration with the U of G SPARK Program

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ScholarshipsDoctoral Research Assistantship

2007 recipient was Michael Steele, a native of Oxford County

Belleville Cheese Warehouse Scholarship

2007 recipients were Kevin Buchner of Oxford and Andrew Lockie from York County

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Board and Staff

Henry Oosterhof was elected to the Board in Region 3 replacing Paul Henderson Bill Emmott and Bruce Saunders were re-elected to the Board in Regions 7 and 11, respectivelyKim Waalderbos began an internship program and is attending monthly Board MeetingsAll stakeholder input and support is very much appreciated

42nd Annual Report

Thank you