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Milk prices will rise by 2.5% as dairy farmers adjust to cost increases

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

The Crown Corporation, which oversees Canadian dairy supply management, said Tuesday that farm gate milk prices will rise by about two cents per liter, or 2.5 percent, on September 1.

This is an increase after milk prices rose six cents per liter, or approximately 8.4 percent, on February 1.

When prices are reviewed again this fall, the commission said the mid-year price increase approved for September 1 will be cut by any adjustment next February. Prices are usually checked once a year.

The decision follows a request by Canadian dairy farmers in May for a mid-year milk price hike due to high inflation.

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

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Dairy farmers in Canada said the commission’s decision to raise prices would recognize that farmers are under pressure as a result of higher input costs.

“Dairy farmers are not responsible for the unprecedented global economic turmoil that is affecting all sectors of the economy, but they must adapt to conditions like everyone else,” the group said in a news release Tuesday.

Prices may rise at the consumer level

The commission said in the memo that the increase in milk prices would partly offset the increased production costs due to inflation.

“Food, energy and fertilizer costs have been particularly affected by the increase of 22 per cent, 55 per cent and 45 per cent respectively since August 2021,” the commission said.

The actual increase in milk prices for consumers could be greater since different players in the supply chain can afford the additional price increases.

“The impact of these adjustments on retail prices depends on many factors, such as manufacturing, transportation, distribution and packaging costs across the supply chain,” the commission said.

Still, the increase approved by the Dairy Commission is lower than some industry observers expected.

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

“Based on the data we are looking at, we were expecting a five percent northward increase. I was expecting more of a route.”

The Dairy Commission has been under pressure in recent weeks from various industry stakeholders to manage prices for Canadian consumers.

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

Gary Sands, senior vice president of public policy for the Canadian Independent Grocery Federation, acknowledged that the increase was lower than expected.

Still, consumers can expect to pay more than 2.5 per cent more as companies “piggyback” on their own increases on milk farm gate prices, he said.

Meanwhile, in an ordinance sent to the President of the Dairy Commission of Canada in mid-April, Agriculture Minister Marie-Claude Bibau outlined the need for greater transparency.

Bibeau said the commission’s review of milk pricing decisions was one of the priorities to ensure a clearer and more transparent communication with Canadian consumers and dairy partners.

The Commission shared a news release on the increase in farm gate milk prices by informing stakeholders, including processors, retailers and restaurants, about the price adjustment.

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