With the COVID-19 pandemic in mind, the Canadian Dairy Commission has set aside its usual milk price adjustment formula and will instead increase the price based on its own review.
The CDC on Monday announced the farm gate price of milk will increase by $1.46 per hectolitre (100 litres) effective Feb. 1, 2021, pending approval by provincial dairy authorities early next month.
“This year, because of various factors such as the COVID-19 pandemic, the usual pricing formula was not applied,” the commission said in a release.
“The rise in producers’ revenues will partially offset losses incurred due to the COVID-19 pandemic and market trends which have caused revenues to remain below the cost of production.”
That increase is expected to translate to a two per cent increase in the price for milk used to make dairy products for the retail sector and the restaurant industry, the CDC said.
The CDC rendered its decision on the price adjustment of milk based on its own consultations, as it’s allowed to do “under certain conditions” for a given year in which an industry stakeholder asks that the formula not be applied.
The CDC said Monday it won’t change its butter storage fees, which it charges for its storage of a “certain quantity” of butter to guarantee adequate supplies throughout the year and prevent shortages.
That said, the commission added that it recognizes a two per cent increase in butter processing costs, which apply to the butter manufacturers sell to the CDC “in the context of its storage programs.”
To reflect that increase, the CDC said Monday, its support price for butter used in its storage programs will increase effective Feb. 1, to $8.7149 per kilogram from the current $8.5524, itself down half a cent from the adjustment made Feb. 1 this year.
The support price is the price at which the CDC buys and sells butter through its domestic seasonality program, to balance seasonal changes in demand in Canada’s supply-managed domestic market. Provincial marketing boards also use that price as a reference point in pricing industrial milk.
How these adjustments ultimately affect retail prices will depend on “many factors,” the CDC said, such as manufacturing, transportation, distribution and packaging costs.
However, the commission said, “it should be noted that the consumer price index for dairy products has risen by only two per cent since 2015, whereas the index for food in general has risen by 10 per cent.”
Source: Glacier FarmMedia Network/Canadian Cattleman