Milk, cheese prices could soon jump 10 to 15 per cent

The price of milk and dairy products is expected to increase sharply after the federal Canadian Dairy Commission recommended a record 8.4 per cent increase in wholesale milk prices.

The increase — which is almost double the commission's previous record increase of 4.54 per cent in 2017 — is intended to help offset soaring production costs due to the COVID-19 pandemic, according to the commission.

But for consumers facing pandemic-fuelled sticker shock in almost every aisle of the grocery store, it's yet another blow to the budget.

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"In New Brunswick, for example, my guess is that fluid milk could go up by eight to 10 per cent almost overnight in February," Dalhousie University food policy expert Sylvain Charlebois told Shift New Brunswick.

That increase would migrate to other dairy products as well, including yogurt, ice cream and cheese.

"There is a multiplier effect," Charlebois said. "For example, you need eight to 10 litres of milk to make one kilo of cheese. Obviously it adds up, and so you could expect [cheese price] increases of 15 per cent, maybe. So that's huge."

Surging costs for dairy farmers

Dairy farmers who have borne the spiralling costs of production for 18 months say the commission's recommendation is welcome news.

"We're certainly glad to see this price increase," said Paul Gaunce, chair of the Dairy Farmers of New Brunswick.

"If we look at the cost of production, it's certainly gone up a lot the last year and a half with, basically, COVID costs," Gaunce said. "Fuel's a lot higher, transportation ... electricity, fertilizer."

Then there's the cost of cattle feed.

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"That's gone up almost 40 to 50 per cent," Gaunce said. "As a dairy farmer, [feed is] one of your biggest costs." 

Gaunce said there is some concern that the price hikes might drive consumers to turn to alternatives to dairy products.

But there's equal concern that, without the increases, more dairy farmers will be driven to leave the sector.

"We're always concerned about losing market share and, you know, that will happen," Gaunce said.

"But I guess if you look at the big picture, all of food has gone up substantially and dairy has actually gone up less than any of the other products. And I still say when you look at drinks in the store, milk is the best bang for your buck."

How the commission works

In a typical year, the Canadian Dairy Commission hikes the price of milk by one or two per cent.

But this year, the Crown corporation, which sets yearly price recommendations, settled on a record price increase of 8.4 per cent.

Charlebois said that's based on data collected in surveys of about 200 Canadian dairy farmers, who are asked in detail about how much it costs to produce milk.

According to its website, the commission also consults with industry stakeholders, as well as retail and restaurant groups.

From there, they work out an average cost "and that's how they come up with the recommendation every single year."

Gaunce, who farms in Keswick, N.B., said the commission pretty much nailed it with its final recommendation.

"It's very much in line ... with what we're seeing on our farms," he said.