Butter, skim milk powder support prices to rise

Support prices for butter and skim milk powder will rise effective February 1, 2008, the Canadian Dairy Commission announced Friday.

The support price for skim milk powder will increase from $5.9212 to $5.9835 per kg, while the support price for butter will increase from $6.8695 to $6.9316 per kg. Support prices are the prices at which the CDC buys and sells butter and skim milk powder to balance seasonal supply-and-demand changes on the domestic market.

This increase is expected to translate to a revenue increase to dairy producers, worth one per cent or 70 cents per hectolitre for the industrial milk used to

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make products such as yogurt, cheese, butter and skim milk powder. The overall increase to producers may vary, depending on the pricing decisions made by provincial authorities, the CDC noted in a release.

“Increased productivity at the farm level allows the CDC to announce an increase that is below inflation. Our decision takes into account increases in direct farm costs such as feed, fuel, fertilizers and herbicides” said CDC chair Randy Williamson.

The new support price of butter will also include an increase of two cents per
hectolitre in the carrying charges collected by the CDC to pay for the storage of the normal butter stocks.

Meanwhile, the margin received by processors for the skim milk powder and butter

purchased by the CDC, and included in the support
prices, will increase by 10.7 cents per hectolitre to take into account rising energy costs.

The impact of this increase at the retail level will be influenced by many factors, the CDC said, listing factors such as manufacturing, transportation, distribution and packaging costs
throughout the supply chain.

The Canadian Restaurant and Foodservices Association (CRFA) said in a separate release that the CDC’s decision to hold the increase to just one per cent was “a step in the right direction” to control the costs that consumers and restauratuers pay for Canadian dairy products.

CRFA said it met with the
CDC in November to argue for a price freeze on industrial milk, saying that price has risen by 54 per cent since 1994, while the cost of milk production has risen by just 1.5 per cent due to increased productivity.

“With unjustifiable price hikes over the last many years, dairy products
have priced themselves off the menu. Restaurateurs want to grow the market for
Canadian dairy products, but it can’t be done when these products are among
the most expensive in the world,” said CRFA vice-president Ron Reaman in a release.