Canadian Dairy Commission
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Increase to Support Prices for Butter and Skim Milk Powder effective February 1, 2002

OTTAWA, December 14, 2001   The Canadian Dairy Commission (CDC) announced today that, effective February 1, 2002, the support price for skim milk powder will increase from $4.8394 to $4.9858 per kilogram, and for butter, from $5.7261 to $5.9011 per kilogram. The decision was made after giving consideration to increased costs faced by dairy producers, consultations with major dairy industry stakeholder representatives from the farm, processing, further processing, restaurant and consumer sectors, as well as other economic indicators.

These higher support prices are expected to provide dairy producers with an increase of $1.01 per hectolitre or 1.7 percent over last year's return. An additional $0.85 per hectolitre was included for the purpose of continuing to allow for the recovery of the last portion of the consumer subsidy from the marketplace.

The assumed processor margin, which has remained unchanged at $8.31 per hectolitre for the past four years, will increase by $0.14 per hectolitre in response to major utility cost increases facing dairy processors.

Carrying charges associated with the costs of storage programs used to balance seasonal fluctuations in milk production will increase to $0.08 from $0.07 per hectolitre.

"Commissioners considered that increases in feed costs in the past year due to adverse weather conditions and the need to increase farm management fees as a result of growing farm management activity, partially offset by some reductions in fuel and oil, fertilizer and transportation costs, should be reflected through a support price adjustment ", explained CDC Chairman Michel Pagé.

The CDC buys butter and skim milk powder at prevailing support prices to balance seasonal supply and demand changes on the domestic market. Support prices are used as references by provincial boards to price milk sold to processors.

The market impact of the total increase will be influenced by many factors such as the implementation of the increase in the provinces, as well as manufacturing, transportation, distribution and packaging costs throughout the supply chain.

This is the final portion of the consumer subsidy to be recovered from the marketplace, marking the end of the program on January 31, 2002. Since the subsidy moderated the price of industrial milk products sold to consumers, the Commission has maintained the practice of allowing for the recovery of the reduced federal payments from the marketplace.

The assumed processor margin represents the estimated costs of processing butter and skim milk powder.

Industrial milk is used to make dairy products such as butter, cheese, yogurt, ice cream and skim milk powder.

The Canadian Dairy Commission, a federal Crown corporation created in 1966, is a key facilitator within the Canadian dairy sector. The CDC helps determine, initiate and administer policies and programs which meet dairy producer and processor needs, while ensuring that Canadian consumers are provided with adequate supplies of quality dairy products.

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For further information, please contact:

Michel Pagé, Chairman
(613) 792-2060

Shelley Crabtree, Communications Chief
(613) 792-2016

Canadian Dairy Commission
Ottawa, Ontario
Canada K1A 0Z2
Tel.: (613) 792-2000
Fax: (613) 998-4492