Consumers could be paying more for dairy in the coming months.
In October 2021, the Canadian Dairy Commission (CDC) conducted a review of Canadian farm gate milk prices and various other costs used in administering the supply management system.
As a result of the review and consultations, the CDC intends to implement the following changes on February 1, 2022:
"The farm gate milk price will increase by $6.31/hl (or $0.06 per litre). The increase in producers’ revenues will partially offset increased production costs due to the COVID-19 pandemic which caused revenues to remain below the cost of production. Feed, energy, and fertilizer costs have been particularly impacted. This will increase by an average of 8.4% the cost of milk used to make dairy products for the retail and restaurant sectors. However, the increase in the cost to processors will depend on the butterfat and solids non fat content of the product they manufacture.
The new farm milk prices will become official once they are approved by provincial authorities in early December 2021.
The CDC’s butter storage fees will be reduced from $0.0206 to $0.0137 per kg of butter, a 33% reduction. The Commission stores a certain quantity of butter to guarantee an adequate supply throughout the year, and to prevent shortages. In the case of butter sold at retail, for example, these fees represent half a cent per pound of butter (454 grams).
In addition, the CDC recognizes a 5.0% increase in milk processing costs such as packaging, labour, and transportation. This applies to butter sold by manufacturers to the CDC in the context of its storage programs.
In order to reflect these changes, the support price for butter used by the CDC in its storage programs will increase from $8.7149 to $9.7923 per kg on February 1, 2022, an increase of 12.4%.
The impact of these adjustments on retail prices will depend on many factors such as manufacturing, transportation, distribution, and packaging costs throughout the supply chain.
In the last five years, the consumer price index for dairy increased by 7.4%. This compares to 11.8% for meat, 20.6% for eggs, and 7.7% for fish."
Sylvain Charlebois, Director of the Agri-Food Analytics Lab at Dalhousie University, says the retail price of milk in grocery stores could increase by as much as 10 per cent, adding prices for dairy products like butter, cheese and yogurt could rise as much as 15 per cent.
"It came as a bit of a shock because 8.4% is almost double the previous record, which was at 4.52% set back in 2017," he said. "The way that the pricing formula is managed has been anything but transparent over the years. We don't have access to any raw data. We don't know exactly where these numbers are coming from. If dairy farmers need the increase, that's fine, but the CDC, which is a crown corporation, would need to be way more forth coming with data to justify these increases because the CDC recommendation will impact most Canadians lives."
Pierre Lampron, President of Dairy Farmers of Canada, released the following statement:
“The Canadian Dairy Commission announced an adjustment in the farm gate milk price, equivalent to $0.06 per litre. The increase will partially offset a significant rise in production costs incurred by farmers since the start of the COVID-19 pandemic – for instance, the price of cattle feed has risen dramatically, along with costs of fuel, machinery, fertilizer, seeds for crops, and more. Dairy products are not immune from inflation, however, under supply management, price increases have been more gradual and incremental for dairy products. This price adjustment remains below the increases observed for many other foods since the beginning of the pandemic.”