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06/04/2022

Dairy Farmers of Canada seeks second milk price hike this year, citing inflation

Can consumers afford another price hike?
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Milk bottle in a supermarket on background blurred beverage, milk showing on shelves in the cold freezer.
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Milk prices in Canada could be going up for the second time in a year following a rare request by Dairy Farmers of Canada for a mid-year price hike due to inflation.

The industry lobby group says Canadian dairy farmers are grappling with never-before-seen price increases on goods and services they need to produce milk.

Yet industry observers say people can't afford another price hike.

They warn that dairy processors will likely tack on extra increases if the request is approved, pushing retail costs to untenable levels and increasing food insecurity.

"The companies piggyback on top of those increases so it becomes a double hit,'' Gary Sands, senior vice-president of public policy with the Canadian Federation of Independent Grocers, said Saturday."Canadians are facing very significant affordability pressures. They've lost sight of the impact on the consumer.''

The Canadian Dairy Commission said Thursday it received a request from Dairy Farmers of Canada in late May to trigger the "exceptional circumstances process'' and allow a mid-year milk price hike.

The request comes after farm gate milk prices rose six cents per litre, or roughly 8.4%, on Feb. 1. Dairy prices are usually reviewed once a year.

The commission said it will hold consultations later this month and issue its decision around June 17.

The federal body, which oversees Canada's dairy industry and supply management system, said the milk price increase would be effective Sept. 1.

Dairy Farmers of Canada declined to share how much of an increase it's seeking.

"The lack of transparency is a problem,'' Sylvain Charlebois, Dalhousie University professor of food distribution and policy, said Saturday.

"They just assessed the cost to produce milk in Canada and pushed through a record increase. Now out of the blue they need more and they're giving stakeholders only a couple weeks to prepare for consultations, which are not going to be public.''

Dairy Farmers of Canada said in a statement Thursday the farm gate price of milk is adjusted in an entirely open process.

"This transparency is one of the many benefits Canadians get from our supply management system,'' the group said.

The usual price review once a year creates a gap between the true cost of producing milk today and the annual adjustment, Dairy Farmers of Canada said.

"The exceptional circumstances require a mid-year adjustment to alleviate this gap,'' the group said.

In less than a year, fertilizer costs have risen 44%, fuel is up 32% and animal feed has increased 8%, Dairy Farmers of Canada said.

Sands questioned whether the price of milk would be lowered should those input costs ease.

"If those supply chain challenges pushing up costs start to recede in the coming months, will they be reducing prices?''