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

October 4^th, 2024

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 2023 cost of production indexed to the three-month period ending August 2024. The 2024 iCOP is $90.36/standard hl. 

• Numbers from the 2023 cost of production survey (before indexation) confirm a decrease in on farm costs compared to the 2022 survey results.  Efficiencies found on farm, strong markets for cull cows, and lower input costs helped to alleviate inflationary pressures in the COP, despite 2023 being an environment above Canada’s target inflation rate.
• The 2023 iCOP calculated last year ($93.09/hl) ) overestimated the 2023 COP survey standardized results ($92.60/hl) by $0.49/hl. 
• Since 2023, inflationary pressure in most costs which are indexed have continued to ease. Strong crop yields reduced prices commonly used for feed, reducing purchased feed costs by $2.03/std hl when indexed.  Other costs, such as hired labour and interest rates, remain above the base period. Several indices seem to stabilize as of August 2024. The chart below shows price index changes specific to key costs. 
• Information on the methodology of the cost of production survey and pricing can be found here.
• For more details on the results of the 2023 cost of production survey and 2024 iCOP, click here.

Evolution of selected indices

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

• Over the last two 12-month periods ending August 2024, the CPI has increased by 2.89%.
• Indices which are putting upward pressure on the CPI may not necessarily be reflected in the 2023 COP. Over time, rising prices could become embedded in future COP results.

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

•  The NPF result is a decrease of 0.0237% on February 1, 2025. This will not necessarily translate into 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 5.82 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 11, 2024. In this case, the result of the NPF will be suspended, and the CDC will hold consultations on a potential price adjustment and on the support price for butter. 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 only.