The cost of dairy products is expected to rise further in Canada, but a food policy expert says there could be relief on the horizon if prices for other foods stabilize before the end of the year.
The Canadian Dairy Commission (CDC) has approved a rare second milk price increase this year after allowing milk prices to rise 8.4%, or 6 cents per litre, in February. On September 1, farmers will charge an additional 2.5%, or 2 cents per litre, for milk.
The price hike comes as dairy farmers grapple with their own increased production costs, said Sylvain Charlebois, professor of distribution and food policy at Dalhousie University.
“Basically what dairy farmers are arguing about is that it costs more to produce milk, which is true,” Charlebois told CTV’s Your Morning Friday. “So the Canadian Dairy Commission has basically agreed to an increase, and that increase will be accepted by all boards across the country…So farmers will get more money starting September 1, but for all of us that means milk prices and dairy product prices will all rise further.”
Charlebois said consumers will likely see an even bigger increase in their grocery bills, depending on how the previous 8.4% increase affected consumers.
“Fluid milk is up about 25% since January,” Charlebois said. “The 8.4% on the farm actually equates to a retail sale of 25%, so you can imagine what might happen with 2.5% in the fall.”
In addition to the increase in milk on the farm, dairy processors appear to be applying their own price increases to milk, contributing to a higher overall increase in grocery stores.
In a letter to customers, Lactalis Canada said it was to implement a nationwide average market increase of 5% in September in response to the CDC’s price increase and “significant inflationary costs.” Arla Foods Canada issued a similar notice, saying price increases for its products coming in September would reflect rising dairy ingredient costs and “inflationary impacts on freight and packaging.”
The price of food purchased in grocery stores rose 9.7% year-over-year in May, as the cost of almost everything in shopping carts rose, Statistics Canada said last month. Some consumers pressured by inflation have decided to eat less, according to Food Banks Canada. Last month, the agency released data that suggests nearly one in four Canadians are “eating less than they should” because of inflation.
But even though milk prices are set to rise again, Charlebois said relief could be on the way for Canadians hit by food inflation. Charlebois expects food prices to rise a little more before falling again.
“Food inflation may have peaked in Canada, so food prices will continue to rise, but not at the same pace. Things will probably slow down now,” Charlebois said. “We expect the latter part of 2022 to be smoother for consumers on a tight budget than what we have already seen in 2022.”
With files from The Canadian Press