Dairy support price trimmed starting March 1

Skim milk powder. (PelchGroup.com)

Canada’s dairy producers can expect their overall revenue from sales of industrial milk to slip nearly two per cent starting in March.

The Canadian Dairy Commission on Thursday announced it will snip the support price it sets for skim milk powder effective March 1 to $6.3109 per kilogram — down from the current $6.4754 — and will leave its support price for butter unchanged.

In terms of revenue for dairy farmers, the commission said, that should translate to a decrease of $1.49 per hectolitre — about 1.8 per cent — in what’s paid for the industrial milk used to make products such as yogurt, cheese, ice cream, butter and skim milk powder.

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 use those prices as reference points in pricing industrial milk.

The expected decrease in industrial milk prices follows increases of 1.5 per cent in 2011 and 2012, 0.9 per cent in 2013 and one per cent last year.

The commission chairman, former Saputo Canada president Randy Williamson, said the move follows a decrease in the cost of producing milk in Canada during the last year.

The lower costs of production, he said, “can be seen mostly in feed, milk transportation, fuel and interest paid.”

That said, he added the commission is “optimistic that this price reduction will help grow the demand for dairy products.”

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, also remain unchanged.

“Declining use”

Overall reductions in prices paid to dairy farmers may vary, depending on the pricing decisions at the provincial level, the commission noted. At the retail level, cost factors such as manufacturing, transportation, distribution and packaging also go into what consumers pay.

For example, the New Brunswick Farm Products Commission on Wednesday announced the price consumers in that province pay for milk will go up 1.4 cents per litre as of Feb. 1, citing factors such as “increased costs of processing and delivery.”

Restaurants Canada, a longtime critic of Canada’s dairy pricing frameworks, hailed the commission’s decision, saying the move would see a decrease in dairy prices “after years of exceeding the cost of dairy production.”

“Restaurants want to support the growth of the dairy industry, along with other Canadian agricultural sectors,” Donna Dooher, the association’s interim CEO, said in a separate release. “This decrease helps us stop our industry’s declining use of dairy, and promote growth instead.”

The association noted Wednesday it “fully expects” processors to pass the full price reduction on to restaurateurs for products such as mozzarella. — AGCanada.com Network

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