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November 29, 2021


High grain costs still a persistent challenge faced by Canadian dairy sector



High grain costs and access to feed are ongoing challenges for Canada's dairy sector even as profitability projections remain steady, according to Farm Credit Canada (FCC) in the last of its quarterly updates for 2021.


Farm milk revenues projections have slightly fallen for the country's eastern provinces and marginally improved for the Western Milk Pool (WMP).


Regarding costs, high world grain prices and access to feed in Western Canada contribute to higher production costs are items to be paid attention to.


The January and November gross revenues forecasts are less than 1% apart. However, actual and updated projections of feed cost indices show large increases since FCC's January forecast.


The demand for dairy products is not growing at the pace anticipated earlier this year, said FCC, which pointed to the pandemic as the reason. 


Of concern to analysts is the high cost of feed in the western provinces, particularly Alberta. Drought in the west has pressured the market for animal feed.


Data from the Alberta Ministry of Agriculture and Forestry show a significant increase in feed costs. In May 2021, the price of hay in Alberta bottomed at $131/tonne but then surged to $256/tonne in September. The price for feed barley went from $6.00/bu in May to $6.95/bu in September. FCC said that, as a result of these unforeseen changes, it has had difficulty capturing clear projections.


To address the rise of production costs, the Canadian Dairy Commission announced in October an increase in support prices that will result in a $6.31/hl increase in farm gate milk price. Pending approval by provincial authorities, the new support prices will become effective on February 1, 2022.


- The Cattle Site

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