Cost of dairy to rise again across Canada, but relief could be on the way: expert

The cost of dairy is set to rise again across Canada, but one food policy expert says there may be relief on the horizon if other food prices stabilize before the end of the year.

The Canadian Dairy Commission (CDC) has approved a rare second milk price increase this year after allowing the price of milk to increase by 8.4 per cent, or six cents per litre, in February. On Sept. 1, farmers will charge an additional 2.5 per cent, or two cents per litre, for milk. 

The price hike comes as dairy farmers are dealing with their own increased production costs, said Sylvain Charlebois, a professor of food distribution and policy at Dalhousie University.

"Basically, what is argued by the dairy farmers is it's costing more to produce milk, which is true," Charlebois told CTV’s Your Morning on Friday. "So the Canadian Dairy Commission basically accepted an increase, and that increase will be accepted by all the boards across the country… So farmers will get more money as of Sept. 1, but for all of us, it means that milk prices and dairy product prices will all go up yet again."

Charlebois said consumers will likely see an even greater increase on their grocery bills, based on how the previous 8.4 per cent increase affected consumers.

"Fluid milk has gone up about 25 per cent since January," Charlebois said. "The 8.4 per cent at the farm really equates to a 25 per cent retail, so you can imagine what may happen with 2.5 per cent in the fall."

In addition to the farm gate milk increase, dairy processing companies appear to be applying their own price hikes to milk, contributing to a higher overall increase at grocery stores.

In a letter to its customers, Lactalis Canada said it must implement an average national market increase of five per cent this September in response to the CDC pricing increase and "significant inflationary costs.” Arla Foods Canada issued a similar notice, saying price increases on its products coming this September reflect higher milk ingredient costs and the "inflationary impacts across freight and packaging." 

The price of food purchased at grocery stores rose by 9.7 per cent year-over-year in May as the cost of nearly everything in shopping carts increased, Statistics Canada said last month. Some consumers squeezed by inflation have resorted to eating less, according to Food Banks Canada. Last month, the agency released data that suggests nearly one in four Canadians are "eating less than they believe they should" because of inflation. 

But even as milk prices are set to increase again, Charlebois said relief could be on the way for Canadians hurt by food inflation. Charlebois expects to see food prices rise a little further before dropping again.

"Food inflation may have peaked in Canada. So food prices will continue to rise, but not at the same pace. Things will likely slow down now," Charlebois said. "We're hoping the latter part of 2022 is going to be kinder to consumers on a tight budget than what we saw already in 2022."

With files from The Canadian Press