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Thank a dairy farmer

This week, the CDC recommended a 1.77% increase in farm milk prices, a modest yet meaningful adjustment

We must acknowledge the commendable decision recently put forth by the Canadian Dairy Commission (CDC). This week, the CDC recommended a 1.77% increase in farm milk prices, a modest yet meaningful adjustment. Annually, by November 1, our Crown Commission is tasked with announcing the compensation dairy farmers operating under our supply management regime will receive for their work starting February 1 of the following year. This announcement should be seen as a welcomed development for consumers.

The genesis of this increase can be attributed to the Dairy Farmers of Canada, who advocated for this modest raise in farm milk prices for 2024. Evidently, both farmers and the Commission astutely gauged the prevailing circumstances. An interesting twist in this tale is the three-month delay in the implementation of this increase, now scheduled for May 1, 2024. The CDC's decision to postpone the scheduled milk farmgate price increase was influenced by the ongoing challenges faced by the food industry in maintaining stable food prices. 

In contrast to recent years, this modest increase represents a significant departure. In February 2022, we observed a record-breaking 8.4% increase, followed by a 2.5% increase in September 2022. In February of this year, dairy farmers received another 2.2% increase. Consequently, this recent announcement stands as the lowest increase we have witnessed in recent years.

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

Inflation has taken its toll on consumers at the grocery store, with double-digit food inflation rates. Dairy manufacturers have been grappling with unprecedentedly heightened input costs stemming from the CDC's previous decisions. However, the projected dairy inflation crisis has not materialized to the same extent at the grocery store, with most dairy product prices closely following the general food inflation rate.

According to Statistics Canada, retail prices for fluid milk have surged by an average of 8% since February 2022, following the infamous 8.4% increase. Cream prices have risen by 3%, while butter prices increased by 7% during the same period. The price increases for cheese and yogurt did not exceed 10% since February. Ironically, during that same period, non-dairy alternatives like soy milk increased by 11%, and margarine by a staggering 43%. Nonetheless, questions about the credibility of this data from Statistics Canada linger. 

The debate around supply management and dairy farming in Canada has generated strong opinions, some of which are certainly valid. Canadian farm milk ranks among the most expensive in the Western world. Dairy farmers received quotas for free many years ago, estimated to be worth well over $25 billion. Shielded by high trade barriers and the ability to discard excess milk without full public disclosure, this industry remains conspicuously opaque from a social responsibility perspective, with added compensation from Ottawa. Each farm receives hundreds of thousands of dollars, all under the pretense that Ottawa believed dairy farmers would suffer financial losses due to ratified trade deals. However, dairy farmers have not incurred any financial losses; the system's complexity even baffles politicians influenced by the Dairy Farmers of Canada, who readily support the farming group's arguments. Ultimately, it is the consumers who bear the cost. 

READ: Decoding Canada's food inflation maze 

Nonetheless, we must emphasize the resilience of the supply management system. Canadians have access to a consistent supply of high-quality dairy products, and that’s the truth. As observed in recent months, prices have largely tracked inflation. In the United States, where a federal supply management scheme is absent, the dairy section has experienced volatile price fluctuations, at times exceeding 100%. The enduring legacy of supply management is the stability it affords.

The challenge, however, lies in the fact that our dairy sector is not particularly competitive, primarily due to the absence of a competitive imperative for dairy farmers. They appear to pay limited attention to consumer trends, at least not to the extent required. The onus of innovation falls on dairy manufacturers, who must navigate the terrain of rising input costs, a challenging task when consumers are becoming increasingly price conscious.

Many may harbour hopes of a new system but given the fiscal and political complexities entwined with the existing regime, Canadians are likely to be tethered to it for the foreseeable future. Despite supply management, Canada may face the prospect of losing half of its dairy farms by 2030. This may prompt policymakers to prioritize competitiveness, potentially involving the development of export quotas while supporting the younger generation of dairy farmers who possess a better understanding of the evolving global landscape. Their market may extend beyond Canada's borders.

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