Canadian Dairy Commission
Symbol of the Government of Canada

Support Prices for Butter and Skim Milk Powder Will Increase on February 1st, 2004

OTTAWA, December 15, 2003  The Canadian Dairy Commission (CDC) announced today that, effective February 1, 2004, the support prices for skim milk powder will increase from $5.1966 to $5.3928 per kilogram, and for butter, from $6.1061 to $6.2968 per kilogram.

The higher support prices are expected to provide dairy producers with an increase in revenues of $2.20 per hectolitre for industrial milk, or 3.5 percent.

In January 2002, the CDC committed to cover the cost of production of 50 percent of Canadian producers by 2006. "Today's decision takes us closer to fulfilling our commitment" explained CDC Chairman, John Core.

The assumed processor margin will also increase by 3.5 percent, or $0.31 per hectolitre. A study commissioned by the CDC justifies this increase. The assumed processor margin represents the estimated costs of processing one hectolitre of milk into butter and skim milk powder.

Carrying charges associated with the cost of storage programs used to balance seasonal fluctuations in milk production will be reduced from $0.08 to $0.07 per hectolitre. This reduction is possible since the storage costs were reduced in the last two years, mainly due to low interest rates.

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.

The market impact of the 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.

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.

                                                                                        - 30 -

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