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Milk prices rise for the second time this year


Dairy farmers call for second hike this year as their costs soar

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The state corporation responsible for supplying Canada’s milk will raise prices for the second time this year after farmers demanded more money to offset soaring costs of everything from fuel to livestock feed .

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The Canadian Dairy Commission (CDC), which sets the “farm gate” price farmers receive for their milk, will raise prices by 2.5% on September 1, according to a June 21 announcement. This equates to an extra roughly two cents per liter for manufacturers who process milk into dairy products like cheese and yogurt.

The extra cost at the farm level is likely to work its way up the supply chain and end up on grocery bills and restaurant checks, at a time when food inflation is already at its worst. high since 1981. Saputo Inc., one of Canada’s leading dairy processors, has already announced its intention to meet any CDC price increase with its own increase.

But the 2.5% increase on the farm was actually less than many thought, given the unprecedented rise in the cost of producing milk. Still, critics have taken issue with the CDC’s secretive decision-making process that led to the increase.

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“Milk is a vital product for families and so we are legitimately concerned about having two dairy price increases in quick succession in one year,” said the Retail Council of Canada, a group which represents grocery chains.

It’s rare for the CDC to raise prices twice in the same year – the last time it did so was in 2018. And this year’s double dip is particularly interesting because the first raise was historically high. , to 8.4% in February. But the commission said spending by farmers has increased since then. This is partly due to Russia’s invasion of Ukraine.

The conflict has tightened global fertilizer and fuel supplies and destabilized one of the world’s major breadbaskets. All of this has led to higher prices. Fertilizer costs alone jumped more than 90% in May compared to the same period last year, according to Statistics Canada’s Industrial Product Price Index. At the same time, dairy cattle feed increased by 26%, gasoline for equipment increased by 69% and diesel increased by more than 101%.

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These are not the only additional costs. John Koch, an eastern Ontario dairy farmer, was spending about $800 late last year for a barrel of iodine to disinfect the teats before and after milking his herd of 300 Holstein cows. This spring, the same drum costs $1,350, he said. Even the liners that go into each milking machine have increased by more than 50%. Plus, he spent about $40,000 per load for four truckloads of fertilizer to plant the corn he feeds his cows. Last year it was around $12,000 per charge.

With rising grain prices, it is becoming less and less logical to feed crops with cows.

“Sometimes it almost makes you want to get rid of the cows,” said Koch, co-owner of DH Koch Dairy with his family in Saint-Pascal-Baylon, Ont. “I would make almost more profit if I sold my cows and only grew cash crops.”

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Dairy Farmers of Canada asked the CDC for a mid-year raise in May, but the lobby group hasn’t publicly revealed how much it actually wants. The group suggested that dairy farmers are being unfairly targeted by price hikes, even though other food producers are also raising prices in response to inflationary pressure. The difference for dairy farmers is that they have to raise their prices publicly. Indeed, dairy products are one of three products covered by Canada’s supply management system – a controversial policy that protects the national supply of dairy, poultry and eggs by controlling production, blocking imports and fixing farm gate prices.

“Dairy farmers are not the cause of the unprecedented global economic turmoil plaguing all sectors of the economy, but must adapt to the conditions like everyone else,” the group said.

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In its Tuesday announcement, the CDC said retail prices for dairy products in Canada have not risen as quickly as other consumer goods like meat and eggs. The latest Consumer Price Index report shows retail food prices rose 9.7% in May from a year ago, according to Statistics Canada. Dairy prices rose at a slightly slower pace, at 7.9%, while meat prices increased by 9% and egg prices by 8.4%.

Price increases for Canadian dairy products have also lagged behind the United States and the European Union over the past year, the CDC said in a new document titled Milk Pricing Frequently Asked Questions. But the commission also noted that its decision to raise farm gate prices is “only part of the price paid by consumers”.

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“The net impact on consumers will also be influenced by factors such as transportation, distribution and packaging costs throughout the supply chain,” the CDC said, adding that the 2 .5% will be deducted from next year’s price adjustment.

The board of directors of the commission decided to approve the request for a price increase after consulting trade associations representing farmers, dairy processors, retailers and restaurateurs. But these consultations are kept private, to ensure that industry representatives “can share information that may be commercially sensitive”.

This is about Simon Somogyi, Arrell Chair in Food Affairs at the University of Guelph. These consultations should be public, he said, especially since the CDC’s board of directors is made up of dairy farmers. “If it’s not transparent, it gives rise to a whole host of issues with the (council’s) links to dairy farms,” ​​he said. “You have a situation where there is a significant perceived conflict of interest.”

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The CDC’s Board of Directors is currently made up of two people: President Jennifer Hayes, a dairy and beef producer from the Gaspé Peninsula; and CDC CEO Serge Riendeau, who co-owns a dairy farm with his family. Riendeau, however, was also president of major dairy processor Agropur for 15 years.

“The board is supported on a daily basis by a strong team of experts and all sectors of the value chain are consulted before the board takes a decision on the price of the milk,” said the spokeswoman for the CDC, Chantal Paul, in an email. “I can assure you that at CDC, we work for the entire industry across the country.”

The commission has already been criticized this year for its lack of transparency in the management of prices. Federal Agriculture Minister Marie-Claude Bibeau wants this process to change. She wrote a mandate letter to Hayes, the new CDC chair, which the CDC made public on June 20. A directive asked Hayes to “review the CDC’s approach to milk pricing decisions and provide clearer and more transparent communication to Canadian consumers.” and stakeholders in the dairy sector.

• Email: jedmiston@nationalpost.com | Twitter:

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