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Supply Management > Support Prices

Support Prices

The Commission annually reviews and establishes support prices for butter and skim milk powder for the year to come. Support prices are the prices at which the CDC purchases and sells butter and skim milk powder within the framework of its various programs. Provincial milk marketing boards and agencies use support prices as a reference to determine the price paid by processors for the portion of the milk that is used in the production of butter, skim milk powder, cheese, yogurt, ice cream and other processed foods. (Further details on the different mechanisms used to calculate the price that processors pay for milk can be obtained from the provincial marketing boards and agencies.) Processors, taking into account all the factors that affect their own production costs, then set the prices of dairy products. Finally, dsitributors and retailers decide how they will pass on any increases in the price of dairy products to consumers.

Each year, the CDC, in collaboration with the provinces, undertakes a national study of the cost of producing milk at the farm (COP study). In the fall, the CDC also holds consultations on milk prices with the following segments of the industry: dairy producers, processors, further processors, restaurateurs and consumers. CDC Commissioners then make a decision on the support prices which is announced in mid-December and becomes effective on February 1st of the following year.

The CDC Commissioners base support prices on the following elements: results of the cost of production study, arguments presented by various stakeholders, an evaluation of the processors' margin, economic indicators such as the consumer price index as well as their own experience and knowledge of the industry. In January 2002, the CDC committed to ensuring that by 2006, 50 percent of producers would receive their cost of production.