Food price inflation in Canada begins to spike, experts say

Shoppers pick up fresh produce and groceries at Summerhill Market in Toronto on Feb. 2.Frank Gunn/The Canadian Press

Food price inflation has likely peaked in Canada, according to experts, despite ongoing record highs, which they predict will decline in the coming months.

On Tuesday, Statistics Canada reported another record high for food inflation: Prices rose 9.2 percent in July (9.9 percent for groceries and 7.3 percent for restaurants) compared to July last year. The previous two months saw an 8.8 percent increase each year.

But experts say the worst is probably behind us.

“I think we’ve reached our peak,” said Simon Somogyi, a food business professor at the University of Guelph. “It’s starting to cool down.”

This is because many of the factors responsible for pushing up food prices began to ease earlier this year, he said. Fuel prices, which skyrocketed in early 2022 – a key driver of food price increases – have been falling since June.

And after Russia’s invasion of Ukraine caused major blockades in the region, access to food supplies from Black Sea ports has begun to improve in recent weeks. Earlier this month, large shipments of Ukrainian grains began flowing out of the region.

Prof. dr. Somogyi said supermarket prices should reflect this by the fall, but with two key exceptions: dairy and baked goods.

Earlier this year, the Canadian Dairy Commission announced another price increase, its second for 2022. In February, the CDC increased milk prices by 8.4 percent. According to data from Statistics Canada, the cost of dairy products rose 8.1 percent in July compared to last year. And at the beginning of next month, milk prices will rise by another 2.5 percent.

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This is despite the fact that the cost of milk production fell last year, says an expert. Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University, said milk production costs would be 1 percent lower in 2021.

But a CDC spokesperson said the decision for the upcoming price hike was made on the basis of 2020 figures – not 2021. She said the 2021 figures quoted by Prof. Charlebois are only preliminary figures and have yet to be made public for that reason. created.

Prices for bakery products – and other wheat-based products such as pasta – will remain high for the time being, says Prof. Somogyi. This is because those prices are generally locked in many months in advance and take at least that long to catch up. Statistics Canada data shows that bakery prices rose 13.6 percent in July, compared to last year. And pasta rose 20 percent.

But for most grocery aisles, “things seem to soften quite a bit,” Prof. Charlebois said.

He said the volatility caused by the events of recent years — the COVID-19 pandemic, extreme weather and the Russian invasion of Ukraine — resulted in an unpredictable environment for grocers. And that pain was passed on to the consumer.

“It’s harder to plan and offer discounts and rebates and loss-making products to consumers when you have no idea what’s in store for next week or even the next day,” he said. “Now it seems to be calming down a bit.”

Prof. dr. Charlebois publishes the Canada Food Price report every year, which forecast a 7 percent increase for 2022 in December. He still believes this is possible.

The timing helps. In the coming weeks and months, more and more Canadian field vegetables and vegetables will appear on supermarket shelves, which will continue to put downward pressure on prices.

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What also helps is the weather. Last year, the drought in Western Canada caused crop production to plummet. But as farmers prepare for harvest this year, many are optimistic.

“North America [in general] is doing well”, says Prof. Charlebois. “Mother Nature is cooperating… and it looks good.”

Greg Sears, a grain and oilseed farmer near Grande Prairie, Alta., begins his harvest next week. He said he expects a “fairly decent” crop.

“I think we will see a return to the average,” he said. Commodity prices for his product, he said, are down about 25 percent from their peak earlier this year.

“This bodes well for the customer in the price of food, in theory — if that’s passed on to the consumer.”

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