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
Comments
You could say the dairy industry is frustrated by not having a say on restaurant prices.This was witnessed when the dairy industry gave a cheese discount to pizza operations and saw virtually no price changes to pissa consumers.
Agriculture on a whole can be frustrated with restaurants, whether it's beef, pork,grain or vegetable growers.l had a $7.50 salad the other day, l'm not the primary grocery shopper in the family but l would guess there wasen't 30 cents worth of lettuce and vegetables in that salad.
The restaurant industry hasen't had steady growth the last 25 years by "partially absorbing" food price increases.They have a list as long as a man arm of excuses why their prices have to be what they are but still will manage to grow by 3.8% in 2016 with sales over 62 billion, those are not the numbers of a unhealthy industry and aspecially not when more and more people are dining out than ever before.
The above poster is ignoring both sides of the equation in a rush to judgement - the observation that pizza prices didn't go down when fresh pizza makers got a price reduction in mozzarella cheese, is one sided and ignores any consideration of by how much the price of pizza would have gone up if the price of cheese hadn't been lowered.
The Canadian dairy lobby incorrectly uses the same argument when it claims that the price of milk didn't go down in Australia when supply management ended in that country, yet they, like the above poster incorrectly ignore any consideration of the so-called "null-hypothesis" or "placebo effect" which is an analysis of what would have happened to the price of milk if nothing had been done.
The above poster is engaging in the sort of analysis typically done by the NFU and seemingly adopted by every farm organization in what appears to be a defiance of sound statistical procedure.
Stephen Thompson, Clinton ON
The first rule learned in business is that "the customer is always right" which is, of course, a rule dairy and poultry farmers deliberately flout in supply management.
The only reason supply management lasted more than a minute is because there are:
(1) sky-high tariffs on the import of supply managed products
(2) effectively no substitutes for any supply managed products
Dairy and poultry farmers can charge whatever they want to charge and with no substitutes and sky-high tariffs they can, for all intents and purposes, except for cross-border shopping, get away with their price banditry.
Or, another way of looking at it is that, in Canada, approximately 12,000 dairy farmers have all the clout, 30,000 businesses (and 35.16 million Canadian consumers) that/who use dairy products have none.
Yet, only because they studiously ignore the multiplier effect of the adverse impact of high farm gate prices on the businesses/consumers of dairy and poultry products, the fans of supply management keep warbling that supply management is a "success" and can't figure out why supply management is not well-liked and will not be missed by:
(A) 13.6 million Ontario consumers
(B) 30,000 Canadian food service businesses
(C) every non-supply managed farmer who can't compete with the land-buying clout 200% tariff barriers give to supply managed farmers.
Stephen Thompson, Clinton ON
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