Canada To Raise Farmgate Milk Price, Butter Support Price On September 1, 2022

The Canadian Dairy Commission (CDC) on Monday recommended that on Sept. 1, 2022, the farmgate milk price increase by $1.92 per hectoliter.

The adjustment will increase by 2.5 percent on average the price for milk used in the manufacture of dairy products such as cheese, butter, yogurt, milk and cream intended for the retail sector and the foodservice industry, the CDC noted. The increase will be reflected in the milk class prices according to a ratio of 60 percent on butterfat and 40 percent 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, according to the CDC.

The decision to raise the farmgate milk price comes in response to a recent request from Dairy Farmers of Canada (DFC) to review the price that farmers get for their milk due to the current inflation.

In announcing the farmgate milk price increase, the CDC noted that feed, energy, and fertilizer costs have been particularly impacted by inflation, with increases of 22 percent, 55 percent and 45 percent, respectively, since August 2021.

Next fall, during the regular price review, the September 1 adjustment will be deducted from any adjustment for Feb. 1, 2023, the CDC noted.
In making its decision, the CDC said it considered possible impacts of a price increase on consumers and demand. Stakeholders who presented their views on a potential increase and the impacts a price adjustment would have on their sector included DFC, 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.

Also on Monday, the CDC announced an increase to the support price for butter that will be effective Sept. 1, 2022. The support price for butter will increase from $9.7923 per kilogram to $10.0206 per kilogram.

The support price for butter is used by the CDC when buying and selling butter under its Domestic Seasonality Program. Under this program, the CDC balances seasonal changes in supply and demand on the domestic market by buying butter from manufacturers and storing it when milk production is high and demand for dairy products is low, usually in the spring, and selling this butter back to manufacturers when the situation reverses itself, usually in the fall.

The butter support price contains three elements: the processors’ make allowance, the carrying charges, and the price of milk components. The CDC said it recognizes an increase in processors’ costs of 2.5 percent to offset the increasing costs of energy, packaging, labor and transportation.

This adjustment is included in the support price for butter. Carrying charges collected by the CDC to pay for the storage of normal butter stocks, which also form part of the support price, will remain unchanged.
The rest of the increase in the support price is due to the increase in the farmgate milk price, the CDC explained.

The Dairy Processors Association of Canada (DPAC) had requested that the CDC consider an upward adjustment in the make allowance on butter as part of the broader consultations.

Like most Canadian businesses, dairy processors’ operating costs, beyond just the farmgate price of milk, have significantly increased over the past year, DPAC noted. Estimates based on , .....

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