A news release from the New Brunswick Farm Products Commission blames the increase on rising production costs faced by dairy producers and processors.

It says dairy farmers are paying more for feed, machinery and equipment repairs, fuel and oil, custom work and hired labour.

The commission says the price adjustment also covers increased costs borne by dairy processors, including for packaging, manufacturing, transportation and distribution.

The commission says farmers will receive 1.7 cents more per litre from the price increase, while processors will get 2.4 cents more per litre.

It says pricing for the school milk program will remain unchanged for the current academic year.

Increase announced last fall

In November, the Canadian Dairy Commission said the so-called farm gate price for dairy will increase by 2.2 per cent starting in February.

The Crown corporation oversees Canada's supply managed dairy system. It sets farm gate prices, which are the amounts that farmers will receive for their product.

In Canada, the dairy industry operates under what's known as a supply management system, where the prices that producers get for things such as milk, cream, yogurt and cheeses are set at a level that is supposed to ensure production and sustainability for the industry. 

Prices can vary at the retail level, but one of the effects of supply management is to set a baseline price that farmers can expect for their basic product when it leaves the farm.

The commission raised the farm gate price by 8.4 per cent last February, just as inflation was walloping every part of Canada's economy.

The group then took the almost unprecedented step of raising prices a second time in the same year, by another 2.5 per cent, starting Sept. 1.

The new prices coming into effect Feb. 1 are approved by the provinces.