Consumers may notice an increase in milk prices next month, with dairy farmers starting to pay more for their product.
“We have no choice,” said Weitz Dykstra, president of Dairy Farmers of New Brunswick.
Dykstra milks about 200 cows in Knowlesville and said her production costs have increased significantly over the past two years. Farm-gate milk price increases are essential to the survival of Canadian dairy, he said.
“What was a $50,000 bill last year will be a $100,000 bill this year,” he said. “We need price increases to cover those costs.”
There will be an increase of 2.5 percent in the price of milk for farmers on September 1. This comes after an 8.4 percent increase in February. What that translates to at the retail level is unknown.
The Dairy Commission of Canada is the federal agency that oversees the country’s supply management system. It usually adjusts the farm-gate price of milk every February, but in June, Canadian dairy farmers requested the CDC consider a mid-year increase.
According to Dykstra, double increases occur only in exceptional circumstances.
“It’s extraordinary but not unheard of,” he said. “We have a procedure in place that we can ask the CDC if it’s warranted.”
Despite the double-digit increase, leaked data from the Canadian Dairy Commission suggests that some production costs will decrease in 2021. In an email to the CBC, commission spokeswoman Shana Allen confirmed the standard production cost of milk has risen from $85.42 to $84.57 per hectolitre.
But he explains that this year’s farm-gate price increase is not tied to 2021’s cost of production.
“The numbers in the 2021 COP report bear no relation to the 2022 increase based on the CDC’s 2020 assessment,” he writes. “The 2021 final report will be used for the 2023 milk price adjustment.”
According to Allen, these numbers are preliminary and do not include the Consumer Price Index, which he writes is an important part of the final results.
Sylvain Charlebois is Professor of Food Distribution and Food Policy at Dalhousie University in Halifax. They question the CDC’s reasoning behind this year’s double increase.
“If you look at how they’ve surveyed dairy farmers, the cost of milk production has increased by two percent from 2019 to 2020, and they’re justifying an increase of 8.4 percent and now 2.5 percent,” he said. “So a 2 percent increase in costs and we’ve got 8.4 percent?”
Since February, Canadians have seen a nearly 25 percent increase in liquid milk, according to Charlebois. He wants the CDC to be more transparent and release regular data on costs.
“The problem is when you look at the Canadian CDC and dairy farmers, they’re the same,” he said. “They talk to each other to set prices and completely alienate processors, restaurant operators and consumers.”
Charlebois said farmers are paying more for some inputs now, but that will be reflected in the future.
According to Dykstra, labor savings due to robotic milking is one of the main contributing factors to the reduction in production costs. Otherwise, farmers are paying high prices for essential items like food, fuel and fertilizer, he said.
He said that we have seen a 100 percent increase in the price of fertilizer. “Availability is the main reason for what is happening overseas in Russia and Ukraine.”
He said the increase was incredibly hard on cash flow and prevented secondary work around the farm.
“Because my fixed costs are so high, basically any other projects like improving some buildings, we don’t have the money for this year,” he said.
Dykstra said producers wondered why the dairy industry would have to announce price changes when it was not expected from other farm types operating under supply management.
Statistics Canada’s latest agricultural census says there are 162 dairy farms in New Brunswick. It reports that dairy farms have the second highest income and the second highest operating costs of all farm types in the province.