Each year, the Canadian Dairy Commission (CDC), a federal government Crown corporation, hires outside consultants to estimate the cost of producing milk on the farm. The CDC has never released production cost data and has often recommended raising milk prices at the farm gate, affecting retail prices and Canadian families. Since February, prices of dairy products have increased by an average of 10 to 15%.
Posted at 7:30 am.
However, some information has recently been leaked from the CDC that gives a better idea of how the cost of milk production is established. The CDC announced not one, but two hikes this year: the first to a record 8.4% in February, and the second, 2.5%, to take effect on 1R September. Based on data published by the CDC, these increases appear to be simply unsubstantiated.
Typically, the CDC relies on an annual survey conducted by hired consultants to make its recommendations. The survey is conducted with more than 200 dairy farm operators across the country to measure the cost of milk production. Recently, the results of the 2021 survey were presented in a confidential meeting. Normal cost of production fell from $85.42 to $84.57 per hectoliter, a decrease of 1%. Despite this year’s record increase announced in October 2021, the CDC recommended a 2% increase in 2020.
According to the report, some costs increased, with feed at $0.76 per hectoliter and fuel at $0.28 per hectoliter. But other unit costs have fallen, more so than expensive items. For example, constant flat rate labor and general labor costs decreased by $0.91 per hectoliter, and fixed capital costs decreased by $0.54 per hectoliter. CDC’s pricing formula considers all aspects of dairy farming, from infrastructure to veterinary medicine to promotion; All except subsidy to dairy farmers for hypothetical losses arising from trade agreements. The margin of error in this year’s survey is 2.06%, which is less than 2020 (2.35%).
Preliminary results from the 2022 survey suggest that costs are rising, but that will affect prices in 2023, not this year.
It is very disappointing that the Canadian Dairy Commission, which Minister Marie-Claude Pbew is in charge of, may have bowed to pressure from the dairy industry by increasing farm gate prices without any empirical data. Everything is a myth. This demonstrates the extent to which CDC’s management has become a handicap to the industry’s reputation and to Canadian consumers.
The idea that a unit of milk production is cheap may seem counterintuitive. After all, inflation affects every aspect of our lives. Farmers, industry experts and even the Canadian public have rallied around the argument that everything is too expensive, even for dairy farmers. However, the reality is that many dairy farms today operate without humans. Technology supports the most intensive aspects of dairy farming.
Dairy genetics has made great strides. According to some US estimates, the dairy industry is producing 60% more milk with 30% fewer cows compared to the 1970s. According to Agriculture and Agri-Food Canada, Canada had 977,000 dairy cows in 2021 and produced 95 million hectoliters of milk. In 1990, Canada had approximately 1.4 million dairy cows and produced 73 million hectoliters of milk. This means 43% fewer cows, a 31% increase in production. This will help reduce costs.
Chapter Buttergate Last year, Canadians learned that dairy farmers were using palm oil derivatives imported from Indonesia or Malaysia to produce more butterfat, part of the same process. Not only did it harden the butter, but using palmitic acid was another way to cut costs while generating more revenue. The practice was banned for a time, but dairy farmers have revived it. The Dairy Farmers’ Association of Canada is content to encourage the practice—not prohibit—and dairy farming is self-regulated with little government oversight over quality assurance.
This demonstrates how CDC is morally and ethically compromised. Stay away from dairy immediately.
Greater transparency and honesty and better communication will improve the Crown Corporation’s public image. Most federal Crown corporations have always been willing to provide data that would allow the Canadian public to understand and appreciate their work, but not the Canadian Milk Commission.
Over the years, many have claimed that the CDC misled the public. We now know that the Canadian dairy industry’s “irrefutable evidence” is real.
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