Canadian dairy farmers are getting the largest cost of production increases in decades as costs for feed, labour and other inputs grow.
The Canadian Dairy Commission (CDC) recently announced the change to come into effect on Feb. 1 2022. The prices become official when approved by provincial authorities in December.
The adjustment will be equivalent to about six cents per litre for milk paid to dairy farmers, said Dairy Farmers of Canada President Pierre Lampron in a video statement.
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“It remains to be seen whether other players in the food chain like retailers will use this adjustment to add their own increase.”
“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,” said the CDC in its announcement.
The six cents per litre increase in costs will result in an 8.4 per cent increase in 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 CDC’s butter storage fees will be reduced from $0.0206 to $0.0137 per kg of butter, a 33 per cent reduction. The commission stores a certain quantity of butter to guarantee an adequate supply throughout the year, and to prevent shortages. According to the CDC, in the case of butter sold at retail, for example, these fees represent half a cent per pound of butter (454 grams).
The Canadian Dairy Commission has also change the support price for butter used in its storage programs. They will increase from $8.7149 to $9.7923 per kg on Feb. 1, 2022, an increase of 12.4 per cent. This increase reflects a five per cent increase in milk processing costs such as packaging, labour and transportation.
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 per cent. This compares to 11.8 per cent for meat, 20.6 per cent for eggs, and 7.7 per cent for fish, according to the CDC.
