WATCH: Grocery stores across the country saw a steep rise in dairy prices on Tuesday, with price tags in some provinces increasing by as much as 15 per cent. Anne Gaviola explains what’s behind the soaring prices.
Steep price increases, which took effect at many grocery stores on Tuesday, are as high as 15 per cent in some provinces and coincide with a spike in the price farmers are paid for the milk they produce.
This dramatic price hike will affect everyone who consumes milk, but it will hurt low-income and food-insecure families most, consumer advocates say.
”If families start being unable to provide milk to their kids or they start rationing it or diluting it, you’re going to start to see an increase in health concerns,” said Arianna Scott, CEO of Alberta Food Banks.
Global News reporters in multiple provinces compared the price they paid for a four-litre bag or jug of milk this week with the price they paid in January.
In Toronto, the price jumped to $5.39 from $4.69 at two grocery stores: NoFrills and Loblaws, which are both owned by Loblaw Companies.
That’s a 14.9 per cent increase. At Longo’s, the price increased to $5.49 from $4.79.
In Halifax, the price at Atlantic Superstore, also owned by Loblaws, went to $6.29 from $5.79. That’s an 8.6 per cent increase.
And in Calgary, the price at Superstore went to $5.39 from $4.65. That’s a 15.9 per cent increase. Price hikes were the same at grocery stores in B.C.
Jeff Doucette, general manager of Field Agent Canada, a digital marketing company based in Calgary that tracks the price of milk across Canada, said this week’s increase is the “biggest we’ve seen in one stroke” since it began reporting on milk prices in 2015.
“Supermarkets are not going to eat the price increase that dairy farmers are passing along to them,” he said.
Doucette said other supermarkets which had not yet put their prices up to match Loblaw’s would likely do so in the coming weeks.
Multiple requests for comment from Loblaws, Longo’s, Walmart and Sobey’s were ignored.
A spokesperson for Metro, which also owns Food Basics, refused to answer questions, saying: “Metro does not comment on future pricing or pricing strategies.”
The government didn’t answer any questions about the increased cost of dairy and whether it was justified given the economic strains many Canadians are facing due to rising inflation and the ongoing pandemic.
Why Canadian milk prices are rising
The Canadian Dairy Commission announced in November that farmers would receive an 8.4 per cent increase to the price they’re paid for the milk they make beginning Feb. 1.
This is the largest annual increase in history and nearly twice the previous record.
The price increase is meant to offset rising costs for dairy farmers, especially feed costs, which the commission said have gone up by as much as 30 per cent over the past two years. The commission said the price hike is also meant to give farmers a chance to recuperate some of the higher costs associated with the COVID-19 pandemic.
“This decision, which represents six cents per litre of milk leaving the farm, was made after careful consideration and consultation with all the stakeholders across the supply chain,” said commission spokesperson Chantal Paul in a written statement.
“Farmers must be able to meet their expenses and pay their local suppliers and employees. These trends exist in all parts of the agriculture sector.”
But a Global News investigation found the record-breaking price hike was pushed higher by dairy farmers who asked for steeper increases than what retail and consumer groups wanted.
And while Doucette said he believes the increase given to dairy farmers this year was justified, he also said the whole pricing system, along with the regulation around dairy in Canada, is “really, really wonky.”
“You can buy a two-litre bottle of coke at Walmart (in Calgary) and in Mississauga and it will be the same price,” he said. “But at the same two stores, there’s a $1 difference in a four-litre jug of milk.”
This is partly because farmers pass on their costs of production, Doucette said. If production costs go up, these costs are passed on to processors with the approval of the dairy commission. If production costs go down, the dairy commission would need to consider reducing the price farmers are paid. Doucette said this limits incentives for farmers to find efficiencies and cost savings.
According to the 2021 Field Agent report, the cheapest place in Canada to buy a four-litre bag of milk, which is used as a benchmark due to a lack of price fluctuations across different stores in each province, is Sudbury, Ont., where shoppers pay an average of $4.68. Prices differ across the rest of the country, from $7.19 in Moncton, N.B., to $6.86 in Quebec City to $4.65 in Winnipeg.
The most expensive milk is in St. John’s, N.L., at $1.95 per litre, as the province doesn’t stock four-litre bags. The report didn’t include the country’s territories.
Differences in provincial regulations and the size of local markets also lead to varying prices, he said. In Atlantic Canada — where milk prices are highest — farms are smaller and there are fewer customers.
Processors left guessing
But it’s not just consumers who are being forced to pay more for their dairy this week — processors are feeling the squeeze, too.
Processors buy raw milk from farmers and then turn it into end products for the consumer, such as butter, cheese and yogurt. Those processors then sell their products to retailers. This leaves several opportunities throughout the supply chain for costs to be added to the final price consumers pay at the cash register.
Ashley Chapman, vice president of Chapman’s Ice Cream, said that along with the eight per cent increase paid to farmers for drinkable milk, other milk prices have skyrocketed, including a 22 per cent increase for skim milk powder and a 53 per cent increase for dairy whey. Both of these products are used to make ice cream.
“In the past 14 months, not only has every single component to make my product gone up, but everything that supports my business in a 360 degree way has gone up — whether it’s a bolt for a machine or a cleaning product,” he said.
Chapman said he’s forced to guess what a large chunk of his costs will be each year because retailers, such as major grocery store chains, allow companies like his to negotiate prices for their products only once a year. This happens before increases to milk prices are announced.
Chapman also said he supports supply management — which maintains a fixed price for farmers to protect them from market volatility — because it supports local dairy farmers, but the intricate system doesn’t work because there “doesn’t seem to be any end to the rising cost of doing business.”
Cost increases are necessary
The increased price paid to farmers is only part of the reason why milk prices have gone up. Other costs, from processing to transportation, plus retailer’s costs, are also factored into the final prices that appear on grocery store shelves.
Mathieu Frigon, president and CEO of the Dairy Processors Association of Canada, said the increase given to farmers is only part of the equation; processing and distribution costs also need to be added.
Frigon wouldn’t comment on what those additional costs are, but said Statistics Canada data shows processing costs for dairy products increased 11.5 per cent in 2021 compared with the previous year.
“How those inflationary pressures are dealt with is obviously up to each individual dairy processor,” Frigon said.
Canada has three main dairy processors: Lactalis, Agropur and Saputo. Agropur and Saputo did not respond to requests for comment.
Mark Taylor, Lactalis Canada’s president and CEO, said all communications about pricing with retailers are “private and confidential.” But he confirmed the company has increased costs above and beyond the increase farmers started receiving on Feb. 1.
“Dairy has been … doubly impacted by both inflationary and regulatory increases including, but not limited to, manufacturing, transportation, ingredients, packaging and distribution costs,” Taylor said.