Results cost of production survey, National Pricing Formula, and exceptional circumstances

October 6^th, 2023

Below are the results for the indexed cost of production (iCOP), annual change in the consumer price index (CPI), and National Pricing Formula (NPF). The criteria to initiate the exceptional circumstances mechanism are also evaluated. The formula results presented here do not necessarily correspond to a final price adjustment.

The CDC calculated the 2022 cost of production indexed to the three-month period ending August 2023. The 2023 iCOP is $93.09/standard hl. 

• Numbers from the 2022 cost of production survey (before indexation) confirm a significant increase in on farm costs compared to the 2021 survey results.
• The 2022 iCOP calculated last year ($94.44/hl) closely estimated the 2022 COP survey results ($92.95/hl).
• Since 2022, inflation in specific costs has eased. Other costs, such as interest rates, remain on the rise. Several indices seem to stabilize as of August 2023. The chart below shows price index changes specific to key costs.
• Increases in most indexed costs, including interest rates, were offset by decreases in other costs such as purchased feed, fuel and oil, and fertilizers & herbicides, resulting in a modest increase in the COP, when indexed.
• Information on the methodology of the cost of production survey and pricing can be found here.
• For more details on the results of the 2022 cost of production survey and 2023 iCOP, click here.

Source: Statistics Canada indices: v1811211; v1230996240; v1230996147; v1230996090; v1230996007

The Consumer Price Index is another variable used to determine milk component price changes. 

• Over the last two 12-month periods ending August 2023, the CPI has increased by 4.98%.

To calculate the magnitude of price adjustments to milk components, the National Pricing Formula uses 50% of the annual change in iCOP and 50% of the annual change in CPI. 

Image

• The NPF result is an increase of 1.7736% on February 1, 2024. This is not necessarily equivalent to the next price adjustment. 

Alongside the NPF result, the CDC also evaluated whether stakeholders ^{Footnote 1}  can invoke the exceptional circumstances mechanism. 

• Criteria 1 must be justified by stakeholders making the request.
• Criterion 2 is met. The difference between the iCOP and the CPI is 6.41 percentage points.
• Criterion #3 is not met. 

If they wish to do so, stakeholders may invoke the exceptional circumstances mechanism by informing the CDC in writing by October 13, 2023. In this case, the result of the NPF will be suspended, and the CDC will hold consultations on a potential price adjustment. If none of the stakeholders invoke the mechanism for exceptional circumstances, the NPF result will apply, and the CDC will hold consultations on the support price for butter.