Nova Scotia's dairy industry says it may be forced to dump surplus milk for the first time.

"Very close. The last few weeks it's been nip and tuck,' says Brian Cameron, general manager of Dairy Farmers of Nova Scotia.

Dairy Farmers of Nova Scotia is the producers' marketing board.

Dairy farmer

Lloyd Yuill owns Amberhill Farm in Old Barns, Colchester Co., one of 230 dairy farms in Nova Scotia. (CBC)

It buys all raw milk from farmers and sells it to dairy milk processors in Nova Scotia or other dairy boards in other provinces.

To meet an "unprecedented" increase in demand for butter and cream it raised the milk quota in March.

The beneficiaries are dairy farmers like Lloyd Yuill who owns Amberhill Farm in Old Barns, Colchester Co., one of 230 dairy farms in Nova Scotia.

The increased quota means an extra 10,000 to 15,000 litres a year for his small dairy operation with 80 head.

"It's milking two or three extra cows a day. And who doesn't like extra income," Yuill says.

Skim milk glut

While demand is up for the butter fat used in cream and butter the same is not true for what is left over: skim milk.

So far excess skim milk being produced in Nova Scotia has been dried for use in animal feed where it is worth 10 to 15 cents a litre. Even then the skim milk glut seen in recent weeks may overwhelm that market.

"The option would be if we exceeded that capacity, that some of that skim milk would need to be disposed of, and that would typically mean going to a hog farm or manure lagoon," Cameron said.

The Globe and Mail is reporting that in Ontario surplus skim milk has been dumped in manure lagoons, re-igniting the debate over supply managed agricultural industries, like eggs, chickens and dairy.

Critics say surpluses do not result in lower prices and supply managed systems have little flexibility when responding to fluctuating demand.

2,000 - 3,000 litres more per day in N.S.

In Nova Scotia, the quota increased by about 6.5 per cent over the past year or about 2,000 to 3,000 litres more milk per day.

Dairy Farmers of Nova Scotia says it will remain under pressure to dump milk for several more weeks.

"We're on tenterhooks whether that will need to happen or not. But the decision will be made in a timely way and in an environmentally friendly way to minimize loss to producers," Cameron said.

The Nova Scotia Department of Agriculture says there has not been any milk dumped in Nova Scotia.

"However the pressure on the system remains and if a decision to dump the skimmed off by-product has to be made, it will be made by Dairy Farmers of Nova Scotia," spokesperson Krista Higdon said in an e-mailed statement to CBC News.

"To date the processing plants have been able to continue to manage the high demand for butter fat and the subsequent skim-off milk."