Source: Canadian Dairy Commission
In October 2020, 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, 2021.
This year, because of various factors such as the COVID-19 pandemic, the usual pricing formula was not applied. Instead, the CDC held consultations and rendered a decision on the price adjustment of milk. As a result, the farm gate milk price will increase by $1.46/hl. The rise in producers’ revenues will partially offset losses incurred due to the COVID-19 pandemic and market trends which have caused revenues to remain below the cost of production. This will increase by 2% the price for milk used in the manufacture of dairy products intended for the retail sector and the restaurant industry.
The new farm milk prices are subject to approval by provincial authorities in early December 2020.
The CDC’s butter storage fees will remain unchanged. The Commission stores a certain quantity of butter in order 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 one cent per pound of butter (454 grams).
The CDC also recognizes a 2.0% increase in butter processing costs. 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 $8.5524 to $8.7149 per kg on February 1, 2021.
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. However, it should be noted that the consumer price index for dairy products has risen by only 2% since 2015, whereas the index for food in general has risen by 10%.