Canadian consumers of butter and skim
milk powder will be paying more after Sept. 1 to compensate dairy farmers for
sales losses to imports.
The Canadian Dairy Commission (CDC)
announced that it will buy any unsold butter for $8.0062 per kilogram, up from $7.7815.
The support price of skim milk powder will increase from $4.4176 to $4.5302 per
kilogram.
“These adjustments in support prices
are meant to offset the significant reduction in producer revenues in the last
year,” the commission says.
The revenue losses are due to imports of
diafiltered milk from the U.S., used by Canadian processors to make cheese and
some other dairy products.
The diafiltered milk comes in with no
tariff whereas milk and processed dairy products face tariffs that increase
prices by almost four times.
The prices for butter and skim milk
powder should have come down, not gone
up, if the commission had followed previous practice of pricing according to
the cost of production, which has gone down.
Alistair Johnston, chairman of the Canadian
Dairy Commission, said another reason for declining revenues is lower prices
for the small volume of Canadian dairy products that are exported. World prices
have declined.
Another reason for the revenue
decline is a larger supply of unsold skim milk which is then dumped at distress
prices, such as calf feed.
The commission estimates that the
increased support prices will yield a revenue increase of about 2.76 per cent
for dairy farmers selling industrial milk – the category used to make products
such as yogurt, cheeses, ice cream and butter.
Fluid milk prices are under
provincial jurisdiction.
The commission is telling the public
to not simply blame it for higher prices in September.
“The impact of these adjustments at
the retail level will be influenced by many factors such as manufacturing,
transportation, distribution and packaging costs throughout the supply chain,”
it says.
The margin received by processors for
butter and skim milk powder purchased by the CDC under the Domestic Seasonality
Programs will remain unchanged. Carrying charges collected by the CDC to pay
for the storage of normal butter stocks will also remain unchanged.
“Continually jacking
up prices for restaurant owners and consumers is not a long-term solution when
Canadians are already paying among the highest prices in the world for dairy
products,” says Pierre Cadieux, Restaurants Canada’s Vice President
Federal/Quebec.
“Cheese is being priced off the menu and another price increase
is only going to further drive down demand.
“We
understand concerns around producer margins, but we need solutions that will
increase volumes rather than always increasing prices,” says Cadieux. “Today’s
announcement is yet another indicator that the current system is not working
for producers or end users.”
