The amount paid to farmers is regulated through the Canadian Dairy Commission and Milk Marketing Board.
Dairy farmers are paid based on a formula that takes into account what the milk cost to produce, among other factors.
As much as half of milk production costs come from cattle feed – and with corn and soybean prices significantly down in recent months, analysts say the lower fees are a natural outcome of the system.
“Corn producers have seen their revenue go down for the corn they’re producing. Dairy farmers are benefitting, to some extent, from the reduction in feed costs,” said David S. Rose, an agricultural specialist with CIBC.
“That’s made a major change in the cost of producing milk, so it tells me that the formula’s working.”
Jim Eby, who runs the Eby Manor dairy farm near Conestogo, says the drop may be unusual, but it isn’t significantly hitting his bottom line.
As production is only one stage of the supply chain, analysts don’t believe the lower farm gate prices will mean lower prices for milk at grocery stores.
Eby agrees.
“My feeling is that consumers probably will not see a difference in their price,” he said.