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Canadian Dairy Commission delays farmgate milk price hike by three months

Increase of 1.77% will go into effect on May 1

The Canadian Dairy Commission is delaying a planned increase to the farmgate price of milk by three months as the food industry grapples with pressure to stabilize food prices.

On Wednesday (Nov. 1), the dairy commission said an increase of 1.77% will go into effect on May 1, 2024, instead of February 1, when it would normally take place. The increase translates to just over a cent per litre.

Inflation is affecting Canadians and the entire dairy supply chain, from farmgate to consumers' plates, said CDC chair Jennifer Hayes in a statement.

"The CDC always strives to balance consumer impacts with sustainability of the dairy industry."

The commission, a Crown corporation, reviews the price dairy farmers are paid for their milk every fall. Price adjustments normally come into effect the following February.

In October, the commission said that according to its pricing formula, the price of milk at the farm level could go up by 1.77% in February.

Ahead of the annual price announcement, the Canadian Federation of Independent Grocers called for a pause in price increases to farmgate milk, saying the grocery industry is in an exceptional situation this year.

The CFIG's call triggered a mechanism that set aside the results of the pricing formula in favour of setting a price based on consultations with stakeholders.

About a week later, the Dairy Farmers of Canada also recommended delaying the price hike.

Gary Sands, CFIG's senior vice-president, said he applauds the decision.

"They're hitting the pause button, and we think that's appropriate," he said.

"Right now, we're all trying to achieve price stability... I think they've taken a very prudent course of action."

Sands cautioned though that a pause in farmgate milk prices doesn't mean retail prices for dairy products couldn't still rise in the meantime. Farmgate milk, which is used to make many products including milk, cheese and yogurt, is just one of the many different factors that goes into the prices charged to retailers by dairy processors, he said.

Canada's food supply chain is under pressure from the federal government to keep prices steady after high inflation and a rapid rise in interest rates have increasingly squeezed consumers' budgets.

Like consumers, dairy farmers have also been feeling the pressures of inflation, the CDC said in a statement: "Despite stabilizing feed, fuel and fertilizer costs, producer gains were offset by higher interest rates."

Sands said as May draws closer, the commission should reassess whether a price increase is appropriate. If it isn't, he said he will push to further delay the hike.

With this announcement by the dairy commission, the other supply-managed sectors chicken and eggs will likely also be under pressure to pause price increases, said Sands.

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