TORONTO—Dairy Farmers of Ontario (DFO) is hitting back against claims that it’s dumping milk on farms amid a supply glut.

“It’s just fundamentally wrong… there is no overproduction from on-farm milk,” Graham Lloyd, general counsel and director of communications at DFO said.

The organization, which markets and manages the supply of milk from Ontario farms was under fire last week when The Globe and Mail reported Ontario farms have produced 5.4 million litres of excess milk over the past several months, 800,000 litres of which had been dumped in manure pits known as lagoons.

While Dairy Farmers acknowledges that it has dumped 800,000 gallons of a milk—or more accurately a milk byproduct resulting from the removal of fats used to make butter—it denies claims that milk is being overproduced.

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“The situation is actually quite straight-forward,” Lloyd said. “The market needs the milk that’s coming off the farms to produce butter and cream.”

Normally, the milk byproduct, which is mostly water and proteins once the butter fats are removed, is dried into skim milk powder. As demand for butter has surged four per cent over the last several month, however, Ontario’s capacity to dry the byproduct has not been able to keep up.

DFO says the reported 5.4 million litres of excess milk is not a result of overproduction—as this milk was in fact used to manufacture butter. Instead, it’s the market for and capacity to dry the byproduct that has become problematic. Despite the excess, the organization was able to find a market for all but 800,000 litres of the initial 5.4 million litres of “wet” byproduct.

Lloyd also noted that the byproduct is not what most people imagine when they think skim milk.

“It’s not what you consume – what gets processed and you walk into the grocery store and you buy,” he said. “It’s not that that’s being put into lagoons.”

Lloyd said DFO, which is the largest donor to foodbanks in Ontario, simply wouldn’t allow that to happen.

The fact does remain that 800,000 litres of dairy byproduct was wasted over the last several months, however. To tackle the problem, DFO is looking to increase the province’s capacity to dry the byproduct.

“We’re working with processors to modernize and we’re looking for opportunities to find further investment and looking for opportunities to use that byproduct,” Lloyd said.

Putting new dryers in place could take “a couple years,” Lloyd said. Meanwhile, DFO is is pursuing avenues to sell more of the “wet” product to animal feed producers.

The initial report of milk dumping emerged shortly after a report saying Canada’s supply management systems are hurting consumers and businesses was released by the Montreal Economic Institute.

While critics claim dairy supply management raises the price of a basket of goods and damages international trade relationships, DFO says it guarantees quality and ensures farmers are paid a fair price for their products.