OTTAWA – Consumers buying processed dairy products are about to feel the first effects of Ottawa’s decision to cut dairy subsidies.
Prices for products ranging from ice cream and cheese to yogurt could rise between three and six percent as a result of higher prices being paid to milk producers.
“For the higher butterfat products, it could be in the order of three percent, depending on how much the processors decide to pass through,” said Canadian Dairy Commission policy analyst Nelson Coyle. “For lower fat products, it could be in the six percent range.”
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Beginning Aug. 1, the CDC decided the price farmers receive for their processing milk would increase 95 cents per hectolitre to $55.23.
Processors were given a slightly higher margin of $7.97 per hL.
The government-backed support price for skim milk powder goes up to $3.931 per kilogram from $3.708.
Coyle said it was a result of the falling level of government support and rising production costs.
Effective Aug. 1, the federal dairy subsidy, used during the past two decades to keep consumer prices down, fell 15 percent, with another 15 percent cut planned next year.
The cuts, announced as part of the government’s deficit-cutting campaign, will take the annual cost of the dairy subsidy from approximately $230 million to about $160 million.
Strike a balance
In announcing the increases, which have been requested by producer lobbyists, the CDC said it was trying to strike a balance between consumer pressure against higher prices and producer pressure for an increase. Producers are expecting lower returns in the future as import competition grows and federal subsidies decline.
“This decision is intended to assist in maintaining the industry’s stability as it adjusts to the rapidly changing environment,” said the CDC statement.
The Dairy Farmers of Canada lobby called it a “responsible” decision, given that Ottawa has announced a cut in the annual dairy subsidy.
DFC president Claude Rivard issued a statement calling on consumers to accept the price increase as part of the cost of industry restructuring.
“It is unfortunate that consumers will be directly affected by the government cuts in the consumer subsidy,” he said.
