Restaurant association complains about dairy prices
Tuesday, July 19, 2016
by SUSAN MANN
A restaurant trade association is once again calling for the overhaul of supply management after the Canadian Dairy Commission announced last week plans to boost butter and skim milk powder support prices later this summer. It’s the second support price increase this year.
Restaurants Canada says in a July 15 news release it’s finding the latest increase, effective Sept. 1 tough to swallow as it comes just seven months after the Commission implemented a 2.2 per cent increase in butter and skim milk powder support prices on Feb. 1.
The commission says in its news release that as of Sept. 1, the butter support price will go up to $8.01 per kilogram, an increase of 22 cents from the current $7.78 per kilogram. The skim milk support price will be increased to $4.53 a kilogram from $4.42, up 11 cents per kilogram.
The support price increases mean dairy farmers will see their revenues go up by about 2.8 per cent for milk processed into yogurt, ice cream, cheese and butter.
The Commission, a Crown corporation that’s key facilitator in the dairy industry, uses support prices when it buys and sells butter and skim milk powder under its Domestic Seasonality program, the release says. The program helps the commission balance seasonal changes in demand on the domestic market.
The Sept. 1 increase is needed to offset a significant reduction in producer revenues this year, partly caused by plunging world prices and partly due to larger sales of surplus milk protein in low-priced markets, the release says.
The commission says it can’t predict the impact its price increases will have on retail prices as those prices are influenced by many factors, such as manufacturing, transportation, distribution and packaging costs throughout the supply chain.
Pierre Cadieux, Restaurants Canada vice president, federal/Quebec, says his organization is frustrated with supply management “as a system” and not with the people involved.
Restaurants Canada represents 30,000 food service businesses, including restaurants, bars, caterers, institutions and suppliers.
“The problem is the system is like an economic straightjacket,” he says. “It doesn’t leave any room for negotiation. It’s not a free market.”
Cadieux notes Restaurants Canada members are one of the biggest users of dairy products, such as cheese, milk and ice cream. Restaurants across Canada buy $2.7 billion worth of dairy products annually.
“If we’re that big a client and we have nothing to say on the price, then it’s kind of frustrating.”
Cadieux says, “Each time we have a price increase it’s a variable that we have to partially absorb and partially pass on to the consumer.” However it’s difficult for restaurants to partially suck up the increase, as there are very “thin margins related to the restaurant business.”
There’s also a limit as to how much more consumers will pay for dairy products in restaurants before deciding not to order them, he adds.
Restaurants Canada is pushing for long-term solutions to problems created by the supply management system, such as ideas that will increase the volume of dairy products sold. BF