Canadian Dairy Commission
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Increase to Support Prices for Butter and Skim Milk Powder Effective February 1st, 2000

OTTAWA, December 17, 1999   The Canadian Dairy Commission (CDC) today announced that, effective February 1, 2000, the support price for skim milk powder will rise from $4.5247 to $4.6842 per kilogram, and for butter, from $5.4667 to $5.5407 per kilogram.

The market revenues resulting from these higher support prices will provide dairy farmers with an amount of $0.83 per hectolitre, or 1.49 percent above their current level of returns. The decision maintained the carrying charges of $0.07 per hectolitre associated with the purchase and storage of normal stocks of butter to supply domestic market needs, and to cover some administrative costs related to the CDC's domestic marketing activities. There is no increase in the level of assumed processor margin.

The CDC purchases butter and skim milk powder at prevailing support prices to balance seasonal supply and demand fluctuation on the domestic market.

"The Commission reached this pricing decision after giving careful consideration of the Cost of Production studies carried out in the provinces, as well as the views provided by major dairy industry stakeholders," explained Chairman Guy Jacob.

Support prices are used as references by provincial boards for pricing milk sold to processors. Actual consumer prices for dairy products are also influenced by many other factors such as transportation and packaging costs and margins obtained in the supply chain.

The federal consumer subsidy is being phased out over a five-year period ending January 31, 2002. As the subsidy moderates the price of industrial milk products sold to consumers, the Commission has maintained the practice of recovering the reduced federal payments from the marketplace. As in recent years, the amount to be recovered is $0.85 per hectolitre.

The higher level of producer returns and the consumer subsidy recovery mean that the price of industrial milk sold to processors will increase by $1.68 per hectolitre, or 2.7 percent.

The Commission noted that in the period 1996-1999, returns to dairy producers increased by 3.9 percent while the Consumer Price Index (CPI) for all foods increased by 4.5 percent and the CPI for all products increased by 4.2 percent.

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. In fulfilling its mandate, the CDC provides a framework for the federal/provincial participation that is crucial given the shared jurisdiction in the industry.