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Industrial milk support prices hiked

While the Canadian Dairy Commission says new increases in support prices will help dairy producers catch up with higher costs, some Canadian restaurateurs say the hike will force them further out of the dairy market.

The CDC on Wednesday announced that effective Feb. 1, 2009, the support price for skim milk powder will increase from $6.1125 to $6.1783 per kg, and for butter, from $7.0462 to $7.1024 per kg.

Support prices are the prices at which the CDC buys and sells butter and skim milk powder to balance seasonal demand changes on the domestic market.

For dairy producers, the CDC said, this should translate to a revenue increase of one per cent, or 74 cents per hectolitre (100 litres), for industrial milk used to make products such as yogurt, cheese, butter and skim milk powder.

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

The margin received by processors for skim milk powder and butter purchased by the CDC, and included in the support prices, will increase by 11.3 cents per hectolitre (one per cent) to take into account rising costs.

“Our data show that Canadian dairy producers’ revenues are lagging behind the increases that we saw in the cost of feed, fuel and fertilizers for most of 2008,” said CDC chairman Randy Williamson, who retired as president of Saputo Canada in 2006.

Provincial governments calculate the prices received by producers for fluid milk and cream through a separate process. “The overall increase to producers may vary depending on the pricing decisions made by provincial authorities,” the CDC said.

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

But the Canadian Restaurant and Foodservices Association, pressing the same claims it has made in previous years when CDC increases are announced, sees a different outcome for the dairy sector.

“Given the unjustified, year-over-year increases in the price of industrial milk, as well as the bleak economic outlook, we expected a price decrease,” CRFA vice-president Ron Reaman said in a separate release Wednesday.

“We want to work with the dairy industry, but today’s decision leaves restaurant owners with little choice but to further rationalize their use of cheese and other dairy products.”

The CRFA said the CDC’s numbers show that the cost to produce industrial milk fell by 2.3 per cent in 2007, but the price went up by 1.06 per cent last February and by another two per cent in September.

“To make matters worse, new regulations around compositional standards for cheese that take effect Dec. 14 will further drive up prices and force consumers and restaurant operators to seek out dairy alternatives,” the CRFA said.

Pizzeria owners, for example, pay up to 30 per cent more for their cheese than manufacturers of frozen pizzas do, the CRFA said. To control costs, restaurant owners are using fewer dairy products and introducing menu items that use less or no cheese, the association said.

“The CDC has turned their backs and a deaf ear on us,” said Diana Coutu of Winnipeg’s Diana’s Gourmet Pizza in a separate CRFA release Wednesday before the CDC’s decision was announced.

“Independent pizzeria owners across the country have thrown up their hands in defeat and actively looked for substitutions for 100 per cent dairy cheeses,” Coutu said.

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