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Milk prices set to rise another 2.5% as dairy farmers accept rising costs

The Canadian Dairy Commission has approved a rare second milk price increase this year.

The Crown corporation, which oversees Canada’s dairy supply management system, said on Tuesday farm gate milk prices would rise by about two cents per litre, or 2.5 per cent, on May 1. september.

The increase comes after milk prices rose 6 cents per litre, or about 8.4%, on Feb. 1.

The commission said during the price review this fall that the mid-year price increase approved for September 1 will be deducted from any adjustment for next February. Prices are generally revised once a year.

The decision follows a request from Dairy Farmers of Canada in May for a mid-year milk price hike due to high inflation.

The industry lobby group said farmers are facing unprecedented price increases on the goods and services they need to produce milk.

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Dairy Farmers of Canada said the board’s decision to raise prices is a recognition that farmers have been pressured by rising input costs.

“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 in a press release on Tuesday. .

Price inflation at the consumer level could be higher

The commission said in a note that the increase in milk prices will partially offset the increase in production costs due to inflation.

“Feed, energy and fertilizer costs have been particularly hard hit, with increases of 22%, 55% and 45% respectively since August 2021,” the commission said.

The actual increase in milk prices for consumers could be much larger as various actors in the supply chain could also apply additional price increases.

“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,” the commission said.

Yet the increase approved by the dairy commission is far less than some industry observers had expected.

“It could have been worse,” said Sylvain Charlebois, professor of food distribution and policy at Dalhousie University.

“Based on the data we were looking at, we were expecting an increase north of five percent. I was expecting a lot more.”

The Dairy Commission has come under pressure over the past few weeks from various industry stakeholders to keep prices manageable for Canadian consumers.

“The Canadian Dairy Commission is starting to listen to Canadians and the concerns people have with food inflation,” Charlebois said. “The CDC has tried to strike a balance between what the industry needs and what consumers feel.”

Gary Sands, senior vice-president of public policy for the Canadian Federation of Independent Grocers, agreed the increase was less than expected.

Yet consumers can expect to pay well over 2.5% more due to companies “piggybacking” on their own increases on top of the higher farmgate milk price, he said. he declares.

Meanwhile, in a mandate letter sent to the president of the Canadian Dairy Commission in mid-April, Agriculture Minister Marie-Claude Bibeau stressed the need for greater transparency.

Bibeau said one of the commission’s priorities is to review its approach to milk pricing decisions to ensure clearer and more transparent communication with Canadian consumers and dairy sector stakeholders.

The commission shared a press release on the increase in farm gate milk prices in addition to informing stakeholders, including processors, retailers and restaurants, of the price adjustment through a service note.