'Only dairy farmers can figure out how much money they want for their product and get a government agency they control to tell everyone what they’ll have to pay for that product.'
Share on twitter
Share on facebook
Share on linkedin
Share on whatsapp
Share on email

Surging inflation has suddenly become the Trudeau government’s top economic priority, which rated it top billing in this week’s speech from the throne and dominated the first question period of the new Parliament.

As households worry about the consumer price index, which increased by 4.7 per cent annually in October, the highest rise in 18 years, the government is vowing to look out for Canadian families when it comes to higher housing and other costs.

You would think that Ottawa would be trying to dampen the flames of higher prices and insure that inflation indeed is more “transitory” than a permanent feature in the economy. Instead, a federal agency has decided to ramp up prices to the maximum, in a crass example of how a politically powerful lobby can trump the public interest.

I’m talking about the outrageous decision by the Canadian Dairy Commission to raise farm gate milk prices by 8.4 per cent and butter prices by as much as 12.4 per cent effective Feb. 1. The Commission justifies its decision because of higher costs for feed, energy and fertilizer.

Estimates are that fluid milk prices could jump by 10 per cent while already exorbitant prices for cheese, butter and yogurt could go up by a whopping 15 per cent.

Dairy farmers, like any other business people, are facing higher costs because of rising commodity prices, supply chain issues, higher labour costs etc. But only dairy farmers can figure out how much money they want for their product and get a government agency they control to tell everyone what they’ll have to pay for that product. The public be damned.

The Commission deciding these higher prices is a government-sanctioned bastion of conflict of interest. It’s made up of three members, all of whom represent the dairy industry, two of whom appear in line to benefit from higher milk prices. The CEO is a dairy farmer and former president of Agropur, the giant Quebec farm co-op. The chair is a former CEO of the British Columbia Milk Marketing Board and the third member of the board is a dairy farmer from Quebec’s Gaspé region.

It’s as if the CRTC was made up of three members–from Rogers, Telus and Bell.

The formula used to figure out the price increase is opaque, using self-reported data from farmers which isn’t independently verified. The Retail Council of Canada, representing grocers, was given a sneak peak of the commission’s thinking, two weeks before the price announcement.

The commission’s formula came up with a 6.4 per cent increase. The retailers objected, suggesting a 3.26 per cent hike, reflecting increases in the CPI for food. Their suggestions were ignored. What’s worse, when the commission came out with its final decision, late on a Friday, it inexplicably added two percentage points to the increase, making it 8.4 per cent for milk and 12 per cent for butter.

“There’s room for improvement in the process,” according to Jason McLinton of the Retail Council. What an understatement. The commission had no comment.

It’s tough out there for everyone. If you’re in the restaurant business, grow potatoes or manufacture widgets, you’re also facing inflationary pressures. But before you hike your prices, you have to ask yourself difficult questions. What will my competitors do if I raise prices by 10 or 15 per cent? If I make widgets, will I be swamped by low-cost widgets from abroad? How much can I raise prices without chasing away my customers?

Dairy farmers don’t seem to care about any of these issues. Under supply management, they don’t have to worry about being flooded by lower cost milk from more efficient producers in the U.S. or New Zealand. Imports are tightly controlled. They have little incentive to become more efficient, protected by the value of their quota, which they can sell when they retire.

Here’s one statistic. The average size of a dairy herd in the U.S. is 297. In Canada, it’s one third the size — 97. In Quebec, which still has the largest number of dairy farms, it’s just 75 cows. Although supply management is supposed to protect small family farms, they’re still disappearing. In 2007, there were 14,036 dairy farms in Canada. In 2021, there were 9,952.

Consumers may be ignored by this system but they still have some power. Faced with unprecedented price rises, they may just avoid dairy products. Already, annual consumption of fluid milk in Canada is in free fall, dropping 25 per cent from 85.6 litres per capita in 2004 to 64.2 litres in 2019.

Concerns over allergies and lactose intolerance as well as changes in the Canada Food Guide which no longer favours milk consumption have led to lower consumption as have concerns over the environmental impact of dairy farming. Consumers have more choices. According to Euromonitor, the global market for dairy substitutes was US$17 billion in 2020, double what it was in 2010.

In Canada, sales of milk alternatives have grown by an average of 7.4 per cent a year since 2020, with oat milk in particular surging in popularity. And guess who’s the biggest producer of milk substitutes in Canada? It’s Danone, the French-based food processor that’s also a big yogurt producer. Big business knows dairy is in decline.

And how long will Canadians continue eating cheese, when you need to get a second mortgage to buy a wedge of the stuff?

Dairy farmers may think they’re winners as they once again show their political clout and dictate massive price hikes, but ultimately they may be killing their own industry.

Sees higher demand as more states embrace low carbon fuel standard programs. Expects positive impact from higher cellulosic RVO in 2022 RFS

You may be interested in

Deja una respuesta

Tu dirección de correo electrónico no será publicada.

To comment or reply you must 



Registre una cuenta
Detalhes Da Conta
Fuerza de contraseña