Canadian Dairy Commission
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Support Prices for Butter and Skim Milk Powder Will Increase on February 1st, 2005

OTTAWA, December 9, 2004 The Canadian Dairy Commission (CDC) announced today that, effective February 1, 2005, the support price for skim milk powder will increase from $5.3928 to $5.7282 per kilogram, and the support price for butter, from $6.2968 to $6.8695 per kilogram. Support prices are the prices at which the CDC buys and sells butter and skim milk powder to balance seasonal supply and demand changes on the domestic market. Support prices are also used as references by provincial marketing boards to price milk sold to processors who manufacture dairy products such as butter, skim milk powder, cheese, yogurt and ice cream.

For dairy producers, the higher support prices should translate into a price increase of 3.34 ¢ per litre for industrial milk, or 5.2 percent. Also included in the new support prices is an add-on of 1.66 ¢ per litre to offset some of the negative impacts of the BSE crisis on farms. Dairy farmers should therefore receive an increase of 5 ¢ per litre, or 7.8 percent. At the next pricing review in December 2005, the need for this add-on will be re-evaluated.

"This increase achieves the two goals we had this year. The first was to have support prices that cover the cost of production of nearly 50 percent of Canadian dairy farmers. Our second goal was to assist producers in dealing with the financial consequences of the BSE crisis" explained CDC Chairman, John Core.

The assumed processor margin will increase by 3.9 percent, or 0.354 ¢ per litre. The assumed processor margin represents the estimated costs of processing one litre of milk into butter and skim milk powder. A study commissioned by the CDC justifies this increase.

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

The Canadian Dairy Commission, a federal Crown corporation created in 1966, is a key facilitator within the Canadian dairy sector. The CDC helps design, implement, and administer policies and programs to address dairy producer and processor needs. It is mandated to provide efficient dairy producers with the opportunity to get a fair return on their labour and investment, and to ensure that Canadian consumers are provided with adequate supplies of quality dairy products.

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For more information, please contact:

Chantal Paul
Communication Services
Canadian Dairy Commission
Ottawa, Ontario, K1A 0Z2
Tel: (613) 792-2040 John Core
Chairman
Canadian Dairy Commission
Ottawa, Ontario, K1A 0Z2
Tel: (613) 792-2061