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Dairy support price gets boost starting Feb. 1

Support price increased for butter, cut for skim milk powder

Skim milk powder. (PelchGroup.com)

Canada’s dairy farmers can expect a two per cent bump in their overall revenue from industrial milk sales starting Feb. 1 next year.

Citing dairy producers’ increased costs of production, the Canadian Dairy Commission on Wednesday announced its support price of butter will increase effective Feb. 1 to $7.7815 per kilogram, from $7.4046 currently.

Its support price for skim milk powder, however, will be reduced from its current level of $6.3109 per kilogram, to $4.4176, its lowest level since 1997.

For dairy farmers, that works out to an increase of about 2.2 per cent in what will be paid for the industrial milk they supply to make products such as yogurt, cheese, ice cream, butter and skim milk powder, the commission said.

That 2.2 per cent hike follows the decrease of about 1.8 per cent announced in January, after increases of 1.5 per cent in 2011 and 2012, 0.9 per cent in 2013 and one per cent in 2014.

The support prices for skim milk powder and butter are the prices at which the commission buys and sells those products to balance seasonal changes in demand on the domestic market.

Provincial marketing boards also use those prices as reference points in pricing industrial milk. The prices producers get for fluid milk are worked out in a separate process.

The margins received by processors for butter and skim milk powder the commission buys, and the carrying charges collected by the commission to pay for storage of normal butter stocks, will stay remain unchanged, the commission said Wednesday.

“These adjustments in support prices acknowledge the 3.11 per cent rise in the cost of producing milk and are adapted to changing market conditions” commission chairman Alistair Johnston said in a release.

Restaurants Canada, a longtime critic of Canada’s dairy pricing frameworks, criticized the commission’s decision in a separate release Wednesday.

The previous “one-off” price reduction in January this year was passed on to dairy processors, the foodservice sector group said, but was not passed along to restaurateurs or consumers as it had hoped at the time.

“Our industry wants to grow the market for Canadian dairy products, but relentless price increases are having the opposite effect,” Donna Dooher, the group’s CEO, said in a release.

The cost-of-production formula by which the dairy commission sets its supports includes dairy farms’ capital investments, and such investments should result in efficiencies and lower prices, Restaurants Canada said. “Unfortunately, any savings appear to go to the dairy producer’s bottom line.”

In its latest market bulletin, dated Tuesday, the dairy commission said total Canadian milk production for the 12 months ending in October was 4.8 per cent higher than in the year-earlier period.

The commission said its revised production forecasts suggest “this strong milk production trend will persist throughout the coming months.”

Overall butter consumption has risen by about three per cent year-over-year during the same period, the commission said. “Additional butter imports and increased milk production at the farm level are being used to alleviate butter supply issues in the industry.” — AGCanada.com Network

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