The National Pricing Formula and the February 1, 2023, farmgate price of milk adjustment

137

Source: Canadian Dairy Commission

The CDC did not received any requests from stakeholders following the Canadian Dairy Commission’s (CDC) memorandum on pricing from October 6, 2022, which gave stakeholders until October 14 to notify the CDC whether they wished to suspend the National Pricing Formula (NPF) by triggering the Exceptional Circumstances (EC) process.  As a result, the routine pricing process will move forward.

The NPF is a pricing mechanism that was determined by the industry that takes 50% of the year-over-year change in the indexed Cost of Production (iCOP), plus 50% of the year-over-year change in Consumer Price Index (CPI). The iCOP survey results, along with the Consumer Price Index (CPI), determine the change in percentage to producer revenues, whether the change is an increase or a decrease. The result of this formula provides the percentage by which expected producer revenues should be adjusted to stay in line with iCOP and CPI changes.

The NPF results are evaluated against the three EC criteria. These criteria are in place to ensure that there is no disconnect between the formula results and the marketplace. If one or more of these criteria apply, industry stakeholders1 can request to trigger the EC process and suspend the application of the results of the NPF.

Since the EC process has not been triggered, the NPF will be used to determine the price adjustment. Final price adjustments for 2023 will be announced no later than November 1,2022 in order to provide a sufficient notification period for the supply chain.

For more information on how the Cost of Production (COP) survey is conducted and how it applies to the farmgate price of milk, read the CDC’s Process for the Annual Cost of Production Survey and Pricing Milk at the Farm Level. The results of the COP survey for 2021 are also available.

 


1Stakeholders include Dairy Farmers of Canada, Dairy Processors Association of Canada, Retail Council of Canada, Restaurants Canada, Canadian Federation of Independent Grocers, and Consumers Association of Canada.