Restaurateurs looking for dairy price rollback in 2010

Friday, December 4, 2009

by SUSAN MANN

The food service industry is looking for a big rollback when the Canadian Dairy Commission announces industrial milk support prices for 2010 later this month.

Dairy Farmers of Canada wants to maintain the status quo.

Canadian Restaurant and Foodservices Association representatives say restaurateurs are hurting and prices should be rolled back by 16.5 per cent to bring them back in line with the consumer price index and told the Commission that during a meeting in Ottawa this week.

Therese Beaulieu, spokesperson for Dairy Farmers of Canada, doubts consumers would benefit from the cut and it would affect a lot of farmers.

Once a year the Commission, a crown corporation, sets the support price of butter and skim milk powder following consultations with industry representatives. The announcement is usually made in mid December and prices are effective the following Feb. 1. Provincial milk marketing boards use the support prices as a reference to establish prices for industrial milk, used to make cheese, butter, ice cream and yogurt.

The restaurant industry is a major dairy customer, buying nearly $2.5 billion in dairy products annually.

Garth Whyte, Foodservices Association president, says restaurant operators have reached the breaking point on dairy prices. He’s heard some restaurateurs refer to Canadian mozzarella as white gold. It’s so expensive that restaurateurs can’t put on as much as they’d like or they’re searching for alternatives.

Beaulieu says restaurateurs don’t tell Dairy Farmers of Canada directly that they’re using less dairy products. “They always use the media to say things like that.”

Dairy Farmers’ numbers show consumer buying of dairy products at the retail level was up during the past year to 18 months, Beaulieu says..

She adds that in its recent press campaign slamming dairy prices the association failed to mention that Canada was in a recession and during tough economic times consumers tend to eat more at home rather than in restaurants.

Whyte says every year the association asks for a small reduction in the industrial milk price, but this year it’s calling for a much larger decrease. “Right now we’re hurting badly and we needed to point out to everyone – what about us?”

 “Our profitability is now at minus one per cent on average,” he says. “Virtually every chain has seen a negative quarter.”

Whyte says he sensed at the Commission meeting that people were listening and “they realized our plight and that something needs to be done.” 

Processors didn’t make any pricing recommendations at the meeting, but Don Jarvis, president of the Dairy Processors of Association of Canada, says the Commission’s recent cost of production study shows a small decrease in producer costs and that would indicate there should be “some type of decrease in the support price.”

Jarvis says processors told the Commission demand for dairy products is not “overly strong just because consumer confidence is still weak due to the economy.” And that’s why it’s important to maintain prices at a reasonable level.

Processors want the Commission to make and announce the support price decision earlier in the year, possibly by November, to give them more time to understand any price changes, Jarvis says. BF                              
 

UPDATE

The Canadian Dairy Commission (CDC) announced it will not change support prices for butter and skim milk powder. As of February 1, 2010 the support price for skim milk powder will therefore remain at $6.1783 per kg and the support price for butter will remain at $7.1024 per kg.

"Input prices have decreased slightly from their peak levels in 2008 which now allows dairy producers to cover their cost of production. As a result, the support prices for butter and skim milk powder have been left unchanged." said Randy Williamson, Chairman.

 The CDC announcement said: “Despite the economic downturn, the demand for dairy products has remained stable in Canada. Over the course of the 2008-2009 dairy year, Canadian requirements were 50.04 million hectolitres, up 0.3% from the previous year. Leaving the support prices unchanged will contribute towards maintaining or improving this trend.” BP