On May 27, 2022, Dairy Farmers of Canada asked the Canadian Dairy Commission (CDC) to review the price that farmers get for their milk due to the current inflation.
An important part of the CDC’s mandate is to provide efficient dairy farmers with the opportunity to obtain a fair return for their labour and investment. The CDC therefore agreed to review the request to determine if a price increase was warranted before next year.
After reviewing the points of view expressed during the consultations as well as economic data, the CDC recommends that on September 1, 2022, the farm gate milk price increase by $1.92/hl (less than 2 cents per litre). The increase in producers’ revenues will partially offset increased production costs due to inflation. Feed, energy, and fertilizer costs have been particularly impacted, with increases of 22%, 55% and 45% respectively since August 2021. Next fall, during the regular price review, the September 1 adjustment will be deducted from any adjustment for February 1, 2023.
In making its decision, the CDC considered possible impacts of a price increase on consumers and demand. Nutritious dairy products must remain affordable for Canadian families. Furthermore, dairy farmer revenue has improved in recent months, partly due to last February’s price increase and partly due to the rise in world prices, which affects a significant part of the milk that farmers sell on the domestic market.
The adjustment will increase by 2.5% on average the price for milk used in the manufacture of dairy products such as milk, cream, yogurt, cheese and butter intended for the retail sector and the foodservice industry. This increase will be reflected in the milk class prices according to a ratio of 60% on butterfat and 40% on other milk components. The net impact on consumers will also be influenced by factors such as transportation, distribution and packaging costs throughout the supply chain. The price paid to farmers is only part of the price paid by consumers.
In the last five years, the consumer price index for dairy increased by 7.7%. This compares to 14% for meat, 21% for eggs, and 32% for fish.
The CDC is grateful to the following stakeholders for presenting their views on a potential increase and the impacts a price adjustment would have on their sector: Dairy Farmers of Canada, Dairy Processors Association of Canada, Consumers’ Association of Canada, Retail Council of Canada, Canadian Federation of Independent Grocers and Restaurants Canada.
The new farm milk prices will become official once they are approved by provincial authorities in mid-July 2022.