Keeping milk and butter prices in perspective at a time when COVID inflation threatens to put dairy farmers out of business

Like other sectors and small businesses across the economy, Canada’s dairy farmers have worked hard over the past two years to try to adjust to the unprecedented conditions presented by the COVID-19 pandemic. 

But the sharp rise in inflation caused by the pandemic is a problem for all Canadians and our farmers are not immune. Among other costs, the price of feed has increased by 27 per cent over the past two years, fuel by 30 per cent and seeds by 20 per cent. Machinery has increased by 20 per cent — that is one thing when you or I need a new power drill, but another thing altogether when you consider the expensive price of agricultural equipment.

The Canadian Dairy Commission (CDC) recently announced an increase in the farm-gate prices for milk and butter, to be implemented shortly. This increase will not completely offset dairy farmers’ rising costs, and that is something farmers will have to deal with. However, let’s call a spade a spade here: nobody is looking to take advantage of consumers, but all Canadians lose if our farmers are put out of business because they can’t keep up with inflation.

Despite anti-dairy “advocates’’’ contentions that the rationale for the price increase was unclear, the CDC, an independent Crown corporation, stated specifically that higher farm-gate prices are needed to keep dairy production from being a losing proposition under current economic conditions.

The CDC said farmers have been operating at a loss because of the increase in production costs, primarily for feed, energy, and fertilizer due to COVID-19. In other words, it is not a question of increasing dairy producers’ profit margins, but simply helping them recover part of their production costs which have been increasing for two years.

Prior to announcing a price adjustment, the CDC consulted groups representing producers, processors, consumers, retailers, and the foodservice sector. Let me just say that, as a consumer, I wish that I had as much transparency for the other food products I buy as I have for dairy price adjustments at the farm gate. When was the last time a retailer consulted you on a price increase and explained the reasons for the higher price?

Additionally, anti-dairy advocates have not provided a complete picture to consumers. We estimate that if the full cost of the farm-gate increase were to be passed on to them in a restaurant, it would translate to a $0.01 increase in the price of a glass of milk or $0.04 more for a medium pizza. At retail, it would mean just $0.12 more for a 650-gram tub of yogurt and $0.26 more for a 450-gram package of cheddar cheese.

Affordability is a significant issue, but it is also important for Canadians to keep in perspective the details of how and why prices are set as we all work together to recover from COVID-19. Rest assured, dairy farmers are committed to continuing to produce high-quality milk for all Canadians and contributing to a strong economic rebound in the coming months and years.

Pierre Lampron is President of the Dairy Farmers of Canada