Question Period Note: 2025 MILK PRICE ADJUSTMENT FOR PRODUCERS

Q1 – How might this price change impact the retail price of milk and dairy products? Q2 – How is the government addressing concerns about milk price-setting transparency?

R.1 - The change results in a decrease of less than one cent per litre at the farm gate price.

However, the price paid to dairy farmers is only one factor influencing consumer prices, which are also affected by other supply chain factors like transportation, distribution, and packaging costs. R.2 - As part of its commitment to transparency, the Canadian Dairy Commission has taken steps to provide Canadians and dairy stakeholders with more information about the way the price of milk is set in Canada.

Next Milk Price Adjustment

The Canadian Dairy Commission (CDC) calculates the price of milk at the farm using the National Pricing Formula (50 percent of the annual change in the indexed cost of production (COP) and 50 percent of the annual change in the consumer price index (CPI)). The result is then evaluated considering exceptional circumstances criteria to account for unanticipated effects. These criteria can be used to stabilize the results of the pricing formula over time.

The November 1st announcement is the result of a process that started on October 4, 2024. At the time the CDC informed stakeholders of the results of the cost of production survey, the result of the National Pricing Formula, and the fact that stakeholders can invoke exceptional circumstances.

Stakeholders did not invoke exceptional circumstances this year.

While the 2024 indexed cost of production has decreased by 2.93% compared to last year, the CPI has increased by 2.89% over the last two 12-month periods ending August 2024. Using the cost of production and CPI figures in the pricing formula, the CDC obtains a net potential adjustment of -0.02%.

On November 1st, The CDC announced a -0.02% change of the milk component Class 1 to 4, excluding Class 4(a) SNF and Special Classes.

Once applied to total milk production (i.e., including sales in all classes), the change in milk component prices resulting from the calculation will result in a decrease in producer revenues of less than 1 cent per litre.

The net impact of this decrease on retail prices is unknown since retail prices are also influenced by other factors in the supply chain such as labour, transportation, distribution and packaging costs. A change in price paid to producers for their milk does not necessarily translate to a similar retail price change as it is only one of the elements that affect prices for consumers.

Once reviewed and approved for recommendation, prices will be presented to the P5 Supervisory Body and the WMP Coordinating Committee for approval by e-vote on November 15, 2024.

Prices will be adjusted on February 1st, 2025.

Consumer Price Increases

Consumer prices for dairy products depend on the fat and solids non-fat (protein and other solids) content of finished products.

Raw milk pricing is one of many factors influencing the wholesale and retail price for dairy products paid by consumers. Other factors include the balance between supply and demand, seasonality, and costs throughout the supply chain related to processing, transportation, distribution, and packaging.

In the last 12 months, ending in September 2024, the consumer price index for dairy products has increased at a slightly slower rate than overall food inflation (2.7 percent vs. 2.8 percent). The situation is different for poultry, as prices increased at a slower rate of 1.1 percent, while egg prices increased at a higher rate, at 5.0 percent.  Inflation across other categories that are not supply-managed varied further, including beef (+9.2%), pork (+3.7), fresh fruit (+1.6%), and fresh vegetables (+ 4.4%) for the same period.

On November 1st, 2024, The Canadian Dairy Commission announced a decrease to the farm gate price of less than one cent per litre of milk, effective February 1, 2025.

The price of milk at the farm is set using an annual process which accounts for variations in cost of production and inflation as well as other external factors.

We strongly believe in our supply management system, which ensures a supply of high-quality products at fair prices while supporting farm families across the country.