Canadian Dairy Commission recommends significant increase in raw milk prices

In CANADA, prices for milk and dairy products are expected to rise next year after the Dairy Commission recommended an 8.4% increase in farmers' prices for milk.

The higher price, six cents per liter higher, is meant to help offset the rise in production costs for farmers due to the covid-19 pandemic , sharp increases in the cost of feed, energy and fertilizer.

The price increase is expected to be approved by provincial governments next month and will take effect February 1.

Meanwhile, the commission, which manages the delicate balance between supply and demand for dairy products in Canada, is also raising the price of butter used in its storage programs by 12.4 percent and admitting a five percent increase in milk processing costs such as packaging, labor and transportation.

it is not yet clear how much of the increase will be passed on to consumers.

According to Sylvain Charlebois, DIRECTOR of the Agri-Food Analytics lab at Dalhousie University, milk prices vary across the country, and some grocers use milk as a "loss leader" to attract customers. Overall, he said, the retail price of milk in grocery stores could rise by 10 percent, while the prices of dairy products such as butter, cheese and yogurt could rise by 15 percent.

“This is definitely a record increase,” Charlebois said, adding that the farm price increase of 8.4% is nearly double the previous record of 4.52% set in 2017.

Dairy Farms of Canada President Pierre Lampron said the dairy price adjustment for farmers will partly offset the higher cost of livestock feed, fuel, machinery, fertilizer and crop seeds.

"Dairy products are not immune from inflation, however, with supply management, dairy price increases have been smoother," Lampron said in a statement. “This price adjustment remains below the increase seen in many other food items since the start of the pandemic.”

According to the Dairy Commission, the consumer price index for dairy products has increased by 7.4% over the past five years, while for MEAT - by 11.8%, eggs - by 20.6% and fish - by 7.7% .

Mathieu Frigon, President and CEO of the Dairy Processors Association of Canada, said that dairy processors' operating costs have also risen significantly over the past year.

“We were certainly relieved to see that by raising the support price of butter by 12.4%, the commission recognized a five percent increase in milk processing costs,” he said in a statement.

Frigon added that the needs of each participant in the system, from farmers to consumers, must be taken into account and balanced when making pricing decisions for farms. “These decisions have a ripple effect, so it is important that their rationale is shared among the participants and understood,” he said.

PioneerProduct based on bnnbloomberg.ca