A blend price increase is on the way for Eastern Canadian dairy farmers

by SUSAN MANN

Dairy farmers in the Eastern Canadian milk pool (that includes Ontario) are getting a 1.1 per cent increase in their blend price starting in February.

The increase stems from the one per cent increase in support prices for butter and skim milk powder announced by the Canadian Dairy Commission earlier this week and the 1.35 per cent fluid milk price increase announced a month ago. The Eastern Canadian milk pool, also known as the P5, is made up of Ontario, Quebec, Nova Scotia, New Brunswick and Prince Edward Island.

Phil Cairns, Dairy Farmers of Ontario senior policy adviser, says the combined fluid and industrial increase means dairy farmers in the P5 will be getting about 87 cents per hectolitre (or 1.1 per cent) more for their blend price. The blend price as of the end of October, the most recent figure, is $79.27 per hectolitre.

In other news for P5 farmers, there’s a possible small quota increase coming some time in the new year too. Cairns says there are mixed market signals with butter and cheese doing relatively well and slowly increasing the requirements for milk production. But the fluid market “has been very soft and dragging that back but not fully offsetting it.”

In addition, the credits in the system have been used up and production “is expected to be at lower levels into the coming year,” he notes, adding the P5 quota committee will be reviewing the market and production trends in January and decide if a quota increase is needed.

Cairns says if the committee decides to increase quotas it will likely be a very small one of about one-half to one per cent.  

The dairy commission announced Tuesday the butter support price will increase to $7.4046 per kilogram from $7.3379 a kg as of Feb. 1, 2014. The skim milk powder support prices jumps to $6.4754 per kg from $6.4170 per kg. The commission buys and sells butter and skim milk powder at the support prices to balance seasonal changes in domestic market demand. Provincial marketing boards also use support prices as references to price industrial milk used to make products, such as yogurt, cheese, butter and skim milk powder.

There are no changes to carrying charges collected by the commission to pay for the storage of normal butter stocks or the margin processors get for butter and skim milk powder the commission buys.

Commission chair Randy Williamson says in a Dec. 17 press release the support price increases are in line with the “consumer price index, which stands at 0.9 per cent.”

But the rate of increase is below that for farmers’ cost of production, which Williamson says has jumped by 1.75 per cent over the last year.

The Canadian Restaurant and Foodservices Association estimates the support price increase will cost Canada’s restaurant industry up to $26 million more for dairy products.

“Our members aren’t going to be happy with this increase,” says Garth Whyte, association president and CEO.

Whyte says the commission and dairy industry must work with the association to change the pricing system. “If we don’t start changing the (dairy) system, its going to start going the same route as Canada Post,” with its declining customer base. In the dairy industry currently, there are declining farmer numbers and missed opportunities, he notes.

The association presented a proposal to the commission and government a few weeks ago for a collaborative approach to set dairy prices and modernize the system.

“Someone needs to look at where we’re going in the future,” he says.

In its press release, the restaurant association says Canadian dairy prices have historically outpaced both the consumer price index and farmers’ own cost of production. During the past 20 years, costs have been triple the consumer price index. “We have told the CDC (Canadian Dairy Commission) that they are pricing dairy off the menu,” the release says. BF