Independent grocers call for milk price pause amid pressure to keep food costs down

The Canadian Federation of Independent Grocers is calling on the Crown corporation that manages dairy supply and pricing to hit pause on any further increases to milk prices amid political pressure to keep food prices down.

The Canadian Dairy Commission reviews the price dairy farmers are paid for their milk every fall and announces whether that price will increase or decrease the following February.

The commission advised several industry groups in a memo Friday that the price of milk at the farmgate level could go up 1.77% in February based on its calculations and its survey on the cost of production.

However, if one or more of these stakeholders invokes an "exceptional circumstance mechanism,'' the price adjustment will not be set by the formula but instead be set through consultations, the CDC said.

The CFIG invoked that mechanism in a letter to the commission Friday (Oct. 6). The federation's senior vice-president Gary Sands wrote that the grocery industry is in an exceptional situation this year.

The food industry is currently under pressure to keep prices stable, with Industry Minister Francois-Philippe Champagne calling on the major grocers to come up with plans to stabilize prices.

Last Thursday, Champagne announced the major grocers have promised to offer discounts, price freezes and price matching.

Sands argued that any increase in milk prices at the beginning of the supply chain would go against the government's objective to stabilize food prices.

In the letter, he urged the CDC to suspend any planned price increases and to "hold further consultations within the context of the Government of Canada's current desire to achieve price stability.''

It's particularly difficult for small and independent food retailers to handle these increases without passing them along to consumers, Sands said in an interview.

"Here we are, in a time frame where the public has been told by the government that we're trying to achieve price stability,'' he said.

"If we're going to have price stability, it has to be for all Canadians. Not some Canadians, depending on where you shop.''

Champagne and Agriculture Minister Lawrence MacAulay were copied on the letter. MacAulay's office confirmed receipt of the letter, with spokeswoman Annie Cullinan noting that the commission's process doesn't determine retail prices. Champagne's office directed a request for comment to MacAulay.

Asked to comment on CFIG's call, the Dairy Farmers of Canada CEO Jacques Lefebvre responded by saying in a statement that "their own practices are at the heart of how much consumers pay at the grocery store.''

READ: Decoding Canada's food inflation maze

The Retail Council of Canada, whose members include the large grocers and which was one of the stakeholders that received the memo, declined to comment. Restaurants Canada, which also received the memo, declined to comment.

This is the second time such a memo has been sent to stakeholders, as well as to the media and the public, as part of the commission's recent efforts to be more transparent, said Philippe Charlebois, a spokesman for the dairy commission.

He said the stakeholders have until Friday to choose whether to invoke the exceptional circumstances mechanism, adding the commission can't confirm which, if any, have chosen to do so already.

Next week, the commission has consultations planned with stakeholders, said Charlebois. If the mechanism is invoked, the February price adjustment will be determined through those consultations instead of through the commission's formula.

The Dairy Processors Association of Canada, for its part, does not intend to invoke the exceptional circumstances mechanism and believes that any price adjustments should be determined through the formula, said president and CEO Mathieu Frigon in an emailed statement.

The CDC has acknowledged receipt of the letter, said Sands. He said he gives the organization credit for heeding recent calls for more transparency into how it determines farmgate prices. This is the first time the CFIG has been privy to the process leading up to the annual dairy price adjustment, he said.

Last year, the commission was under scrutiny amid breakneck inflation and rising costs for farmers as it approved a rare second increase to the farmgate price of milk.

Industry observers at the time raised concerns over a lack of transparency in how pricing decisions are made by the commission.

Over the past year, the commission has met with the CFIG to discuss what goes into their pricing decisions, Sands said: "They're continuing to improve.''