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Milk prices to rise again in September

The Canadian Dairy Commission announced another price hike for milk is coming this fall, a rare second increase in the calendar year.

Wholesale milk will go up by 2.5 per cent on Sept. 1 in a move the commission says is intended to partially offset the impacts of inflation on dairy farmers.

Canadian milk and butter saw their biggest price jumps ever earlier this year, with wholesale milk going up 8.4 per cent and butter 12.4 per cent in February.

The dairy commission, a federal crown corporation that sets the price for dairy at the farm level, normally raises prices by a per cent or two once a year.

This year, the Dairy Farmers of Canada requested a second price hike due to rising costs of fuel, fertilizer and feed associated with inflation.

This comes as the cost of groceries continues to rise as part of Canada’s breakaway inflation problem. In April, inflation was 6.8 per cent year over year, with groceries at almost 10 per cent — the largest increase since September 1981.

May’s inflation data is expected to come out this week.

The dairy commission has been under scrutiny recently for its role in Canada’s supply management system for dairy. Critics say its decision-making process for how it sets dairy prices is not transparent enough. Consultations are not public, and even the groups that are consulted — such as processors, retailers and restaurants — say they don’t know what kind of increase is in store until it’s announced.

Retail Council spokesperson Michelle Wasylyshen said the association has concerns about how the commission determines price increases, and has been asking for transparency to the system.

She said the council understands that input costs for farmers are increasing, but argued many of those costs — including gas — are expected to be temporary.

That’s why the Retail Council is asking for the dairy commission to consider a temporary price adjustment instead so consumers aren’t stuck with the bill when inflation cools down.

“What we’re saying is that if they are temporary in nature, then they should not be permanently embedded into the price of milk,” said Wasylyshen.

Meanwhile, dairy processors — the companies that buy dairy from the farmers and then turn it into the product you buy at the grocery store — have said that the steep hike in dairy costs have made it difficult for them to pass price increases on to the retailers.

Mathieu Frigon, president and CEO of the Dairy Processors Association of Canada, said the increasing cost of buying milk from farmers as well as energy, packaging, labour and transportation are factoring into business decisions by the processors.

“As is the case with most Canadian businesses, dairy processors’ operating costs, beyond just the farmgate price of milk, have significantly increased over the past year,” he said in an emailed statement.

That means processors will be forced to either increase their prices to cover these additional costs, or incur significant losses, said Frigon.

“In the current inflationary environment, the latter scenario is likely not sustainable,” he said.

The relationship between processors and retailers has been strained due to price negotiations for a number of years, said Frigon, which is why the dairy processors association has been advocating for a grocery code of conduct to ensure the needs of every part of the supply chain are considered when price decisions are made.

“In the end, our goal is to ensure that Canadian dairy processors are able to provide Canadians with the dairy products that they want and at a reasonable price,” he said.

The CDC’s release says feed, energy, and fertilizer costs have gone up 22 per cent, 55 per cent and 45 per cent respectively since August 2021.

In a press release earlier this year, the Dairy Farmers of Canada said the costs of fertilizer, fuel and animal feed had increased significantly.

“The exceptional circumstances require a mid-year adjustment to alleviate this gap,” the association said, calling the process “entirely open and transparent.”

Though nobody is disputing that inflation is high across all industries right now, some critics are concerned that once prices cool down, Canadians will be left with unnecessarily expensive dairy products — unlike in the U.S., for example, where the price is market-driven, prices rarely go down in a supply-managed system.

With files from The Canadian Press


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