dairy industry | Costs go down, but prices go up

The Canadian Dairy Commission granted milk price hikes totaling 10.9% this year even as production costs fell 1% in 2021, a report shows. The press got a copy.

Posted at 5:00 am

Isabelle Dube

Isabelle Dube
The press

The internal report from the Canadian Dairy Commission (CDC), which oversees the country’s Dairy Supply Management System, indicates a 1% drop in production costs in 2021. On the other hand, the farm-gate milk price determined by the organization rose by 8.4% on January 1ah last February and will increase by another 2.5% by February 1stah next September.

In its calculation of the cost of production, the Commission found a reduction in the cost of capital, building maintenance and repair, labour, management remuneration, and a reduction in the cost of fertilisers, herbicides and pesticides.

Not surprisingly, animal feed, fuel, lubricants, transportation, promotions, taxes, insurance, electricity and telephone have all gone up.

The Commission analyzed the production costs of more than 200 farms.

The current increase is based on 2020

“The rise in milk prices last February was due to production costs for 2020, not 2021,” said Lucie Boileau, communications director for Dairy Farmers of Canada.

This is confirmed by the CCL, which explains the decrease in production costs in 2021 due to the modernization of the equipment.

In recent years, farms have made many investments that have resulted in efficiency gains, particularly in the workforce. These gains offset rising input costs in 2021.

Shana Allen, Communications Director, Canadian Dairy Commission

“On the other hand, since then we have still seen a significant increase in input costs. These cost increases essentially justify the 2022 announcements,” says Ms.me everyone

According to the Commission’s internal document, production costs increased by 2.8% from 2019 to 2020, while price increases this year will total 10.9%.

According to Sylvain Charlebois, senior director of the Laboratory of Analytical Sciences in Agrifood at Dalhousie University, who has repeatedly been critical of Canada’s dairy industry, the increase granted in 2022 is excessive.

“If we follow the logic of what the Commission said, we should have had a price increase of 2.8% this year because the 2020 increase applies. Which is a reasonable increase, by the way,” he said.

inflation taken into account

When asked about this issue, the Commission confirmed by email that it does not rely solely on the outcome of changes in production costs when granting a price increase. It also takes into account changes in the Consumer Price Index (CPI). “Studying the cost of production is just one step in determining the price of milk on the farm,” Shana Allen points out.

“The production cost data that we use for pricing is indexed,” she continues. By increasing the cost for 2020 according to the inflation rate calculated by Statistics Canada since then, the increase increases from 2.8% to 13.4%.

“The next price adjustment will take all factors into account, namely the increase in input prices in 2022 and productivity gains in 2021,” she assures.

The report was submitted on July 28 to the Canadian Milk Supply Management Committee (CMSC), a national body that oversees the Canadian Dairy Commission’s trading and promotional activities.

Learn more

  • Fewer cows, more milk
    In 2021, Canada had 977,000 cows and produced 95 million hectoliters of milk. In 1990 he had 1.4 million cows and produced 73 million hectolitres.

    Statistics Canada

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