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New Fluid Milk Price Formula Aims For Stability

CO-OPERATOR STAFF / PORTAGE LA PRAIRIE

Dairy producers will begin using a new pricing formula for fluid milk this February.

The new formula relies on two components; cost of production and the consumer price index, each weighted at 50 per cent.

Under the current three-factor formula, consumer price index was 30 per cent of the formula, personal disposable income was 30 per cent and cash costs plus interest was 40 per cent, Brent Achtemichuk, general manager of the Dairy Farmers of Manitoba, told producers during a district meeting Oct. 11.

I think the processors were looking for a little more stability, so that is why they took off the personal disposable income. I guess they felt it wasn t a stable measure.

He added the consumer price index, at approximately a two per cent increase per year, offers a measure of predictability. The change came out of discussions by the National Fluid Milk Price Committee.

We re satisfied it s a pricing formula that will be defendable because it measures the cost of productions, which is what our pricing is based on, said David Wiens, chairman of the Dairy Farmers of Manitoba. And on the other hand, it adds the consumer price index, which creates a stabilized effect on the price.

The chairman said similarities between the new and old formulas have him confident the new formula will work well. One other important feature of the new pricing formula is that it no longer includes two price adjustments per year.

It s a once-a-year price adjustment, … and for the most part I think this works fairly well, Wiens said. My understanding with our processors and stakeholders is that they like this formula too, because it is transparent and they can explain to consumers when there is a price increase, that it is based on these factors.

He said recent milk prices have been fair, noting having pricing formulas in place reduces the amount of time spent negotiating and removes subjectivity from the process.

We know this formula will generate fair results, said Wiens. We ve had experience working with these factors, and that s why the producers are comfortable with this.

Producers at the meeting agreed the new formula was both fair and practical, but stressed the importance of keeping up to date on changes by attending district meetings.

It was a very good meeting, and it was very informative about quota management, production, pricing, and also what is going on in Manitoba and throughout Canada, said Norbert Rey who has been farming for about five decades.

He added a shrinking number of dairy farmers in the province means there are fewer people left to attend district meetings.

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We re satisfied it s a pricing

formula that will be defendable because it measures the cost of productions, which is what our pricing is based on.

DAVID WIENS

About the author

Reporter

Shannon VanRaes is a journalist and photojournalist at the Manitoba Co-operator. She also writes a weekly urban affairs column for Metro Winnipeg, and has previously reported for the Winnipeg Sun, Outwords Magazine and the Portage Daily Graphic.

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