October 6, 2022
Below are the results for the indexed cost of production, annual change in the consumer price index, and National Pricing Formula. The criteria to initiate the exceptional circumstance mechanism are also evaluated.
The CDC has calculated the 2021 cost of production indexed to the three-month period ending August 2022. The indexed cost of production is $94.44/standard hl.
- This is 2.2% higher than last year’s indexed COP of $92.38/hl1 .
- Increases in cash costs since were partially offset by efficiency gains on farms.
- Inflation in specific cost variables between 2021 and 2022 has a large impact on the indexed cost of production which will be used for next February 1 price adjustment. However, several indices show signs of stabilization by August 2022. The chart below shows price index changes specific to key cost variables.
- Information on the methodology of the cost of production survey and pricing can be found here.
- For more details on the results of the cost of production survey, click here.
Source: Statistics Canada indices: v1811211; v1230996240; v1230996147; v1230996090; v1230996007
The consumer prices index is another variable used to determine milk component price changes.
- Over the last two 12-month periods ending August 2022, the consumer prices index has increased by 6.12%.
To calculate the magnitude of price adjustments to milk classes, the National Pricing Formula uses 50% of the annual change indexed cost of production and 50% of the annual change in consumer price index.
- As indicated last June, the price increase on September 1, 2022, is considered as an advance to any price increase that would apply on February 1, 2023 and is deducted from the formula result.
- The NPF result (net of the advance provided on September 1, 2022) is an increase of 2.1922% on February 1, 2023.
Alongside the National Pricing Formula result, the CDC has also evaluated whether the exceptional circumstance mechanism can be requested by a stakeholder2.
- Criteria 1 must be justified by stakeholders making the request.
- Criterion 2 is not met.
- Criterion #3 is met. The indexed cost of production is 4.79% higher than producer revenues.
If they wish to do so, stakeholders may trigger the exceptional circumstances mechanism by informing the CDC in writing by October 14, 2022. In this case, the result of the National Pricing Formula will be suspended, and the CDC will hold consultations on a potential price adjustment. If none of the stakeholders trigger the mechanism for exceptional circumstances, the National Pricing Formula result will apply, and the CDC will hold consultations on the support price for butter.
CDC representatives are available to meet with stakeholders if further details are needed.
| Timeline Overview for February 1st, 2023 Pricing Process | |
|---|---|
| October 14th, 2022 at 2pm (ET) |
Stakeholders must indicate in writing to the CDC Board if they will trigger the exceptional circumstances process by 2pm (ET).
CDC will notify stakeholders whether the exceptional circumstances process was triggered by end of day on October 14th. |
| October 19-21, 2022 (various times) |
Stakeholder consultation meetings by appointment. |
| No later than November 1st, 2022 | Pricing announcement from the CDC. |