Cost of milk used to make dairy products such as milk, cream, yogurt, cheese and butter for the retail and restaurant sectors has increased by an average of 1.77%
What are Canadian farm gate milk prices?
This refers to the prices that dairy farmers receive for milk at their farms. These prices are regulated by the Canadian government through supply management systems, aiming to ensure stable incomes for dairy farmers while also managing the supply of milk to match domestic demand.
The CDC plays a central role in setting milk prices. It takes into account factors like feed costs, labour expenses and other operational costs and uses a cost-of-production formula to determine the farm gate prices. These prices are not static and are adjusted to reflect changes in production costs and market conditions and other factors, such as import controls and production quotas.
The size of the impact the price adjustments have also depends on the supply chain reactions, as only the price of milk that farmers get is regulated. Once it leaves the farm, it enters the market where a number of factors influence the price.
How much have milk prices increased?
Following its annual review, the CDC increased prices 1.77 per cent, representing just over 1 cent per litre ($0.0153/litre).
The adjustment was calculated using the National Pricing Formula, a pricing mechanism that was determined by the industry. It takes into account 50 per cent of dairy farmers’ costs of production as well as 50 per cent of the consumer price index.
This adjustment means the cost of milk used to make dairy products such as milk, cream, yogurt, cheese and butter for the retail and restaurant sectors will increase by an average of 1.77 per cent. The net impact on consumers is also influenced by other factors in the supply chain such as transportation, distribution and packaging costs. The price paid to farmers is only part of the price paid by consumers.
Why have prices increased?
The commission cited inflation and higher interest rates as contributing to the adjustment.
“Inflation is impacting Canadians and the dairy value chain from farm gate to consumer’s plates,” said Jennifer Hayes, chair of the CDC.
Hayes added that the commission “strives to balance consumer impacts with sustainability of the dairy industry.”
The increase follows a 2.2 per cent last year, which translated to closer to 2 cents per litre. The report cited increased costs in feed, fertilizer and fuel, as well as increased interest rates and disruptions to supply chains.
When did the price change take effect?
The CDC conducted its annual review in October 2023, but delayed the price adjustment from Feb. 1, 2024 to May 1, 2024.
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