Last week, Industry Minister François-Philippe Champagne announced he had secured “initial commitments” from the country’s big grocery chains to stabilize food prices as part of the Trudeau government’s belated response to the rising cost of everything.
This week, the Canadian Federation of Independent Grocers, which represents more than 6,900 independent and franchised food retailers, proposed a novel way of addressing at least one part of Canada’s persistent food inflation.
It has asked the Canadian Dairy Commission to pause the annual increase in the price farmers get for their milk – the farm-gate price – in 2024. Barring an agreement to do so, the price that restaurants and dairy product manufacturers pay for milk as of February, 2024, will rise 1.77 per cent – an increase that will likely get passed on to consumers.
It’s an idea that has merit. The CDC is a key part of Canada’s agricultural supply management system, which fixes the price of dairy products, eggs and poultry, while also imposing high import tariffs on those goods and setting quotas on domestic production.
Every fall, the CDC announces an increase in the farm-gate prices that comes into effect the following Feb. 1 – hence the knowledge that the increase for 2024 will be 1.77 per cent.
Since 2020, those annual increases have outstripped Canada’s inflation rate, as measured by the consumer price index.
Their compounded effect from February, 2020, to February, 2023, has been to raise the farm-gate price by 18 per cent – a period during which the CPI rose 12.5 per cent.
The rise in the retail cost of basic dairy products over the same period mirrors the increase in the farm-gate price. From February, 2020, to February, 2023, the retail cost of fresh milk rose 17.5 per cent. The retail cost of butter, whose price is also controlled by the CDC, jumped a whopping 29 per cent.
It needs to be pointed out that the CDC doesn’t set the retail price – that’s the job of grocers. But the strong correlation between the rise in the farm-gate milk price paid by dairy product makers and the rise in retail prices can’t be ignored.
And so, yes, a pause in CDC’s annual farm-gate increase in 2024 would be welcome. The Canadian Federation of Independent Grocers says its smaller members would have a hard time not passing next February’s 1.77-per-cent increase on to consumers, and that pausing it would align with the federal government’s goal of stabilizing prices.
If Ottawa wants to rein in food inflation, a good place, indeed, to start would be at one of its very own Crown corporations, the CDC.
As the numbers show, throughout the current inflationary period, Canada’s dairy farmers have been immunized against rising costs by an arcane system that puts their interests far above those of consumers – especially families with young children who drink milk.
Not only is the price for their product guaranteed and protected against inflation, but Canada’s 9,952 dairy farms have also received, and will continue to receive through 2029, a total of $2.95-billion in direct compensation for the minimal loss of market they suffered thanks to recent free-trade deals with the European Union and Pacific countries, and because of the renegotiated North American Free Trade Agreement (now called the Canada-United States-Mexico Agreement).
That works out to an average of $296,422 per farm.
Dairy farming, like all farming, is not easy work. This is especially true in Canada, where the federal government has consistently permitted large foreign and domestic corporations to merge and dominate almost every part of the agri-food economy – something this space decried last week.
This anti-competitive concentration has harmed farmers, such as those in the beef industry, whose prices are largely set by two powerful companies. It also hurts consumers and manufacturers; the five big grocery chains control 80 per cent of the market, giving them immense power to limit competition and squeeze suppliers.
Meanwhile, the political pantomime of asking the big chains to stabilize prices is unlikely to help. As recently as Wednesday, the chains still refused to say publicly how and when they will lower and/or freeze prices.
Hitting pause on the annual increase in the farm-gate price would be a concrete contribution to the effort to stabilize prices. It would have the added benefit of making Canada’s dairy farmers (briefly) join the ranks of their compatriots facing harder times.