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A South Asian grocery store in the Toronto area (DEBORAH BAIC/Deborah Baic/The Globe and Mail)
A South Asian grocery store in the Toronto area (DEBORAH BAIC/Deborah Baic/The Globe and Mail)

Preet Banerjee

Commodity prices hitting our diets Add to ...

Dining out? Be prepared to see steeper bills at the end of the night. Making meals at home? You’ve probably already noticed a higher cost to do that as well. A multi-year increase in commodities markets means higher prices are starting to trickle down to our pocket books.

For example, peanut crops were smaller than normal last year, owing in part to a drought. With no apparent change in demand and a decrease in supply, prices shot up. That increase can already be felt at the grocery store, but as Kerry K. Taylor, author of the popular personal finance blog Squawkfox.com, notes, sometimes that price increase occurs through creative means. In one of her recent blog entries she recounts how her husband’s favourite peanut butter used to cost $3.99 for 1 kilogram, but instead of the sticker price going up, the packaging and contents shrank to 750 grams.

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The latest Consumer Price Index report from Statistics Canada shows that increases aren’t just happening in the peanut-butter sector. On the high end of the spectrum, the price of beef is up 8.1 per cent, eggs are up 14.2 per cent, flour is up 16.4 per cent and potatoes 18 per cent over the last year for purchases made at grocery stores..

Yet despite all the increases, food purchased from table-service restaurants was up only 2.8 per cent over the same time. Up until now, most restaurateurs have been loath to raise prices on their menus – they’d rather tighten their profit margins to keep customers coming in.

But if the U.S. restaurant market is any indicator, all the slack in the system might be gone. A recent survey of restaurant operators there indicated that 67 per cent would be increasing prices in 2012. It's hard to imagine that the increase in the prices of ingredients used to make our favourite meals will be absorbed by restaurateurs north of the border indefinitely.

An RBC economics report indicated a 15.2-per-cent drop in agricultural commodity pricing during the final six months of 2011, but the longer trend has seen prices rising faster than inflation. If grocery-store items react more swiftly and restaurants are still playing catchup, brown-bagging might make more sense than ever.

Analysts are also suggesting grocery-store prices will further benefit by increased competition as Wal-Mart makes a continued push into their grocery business lines. And when Target opens here in 2013, it is expected to make foray into grocery items as well.

So if you haven’t been packing your lunches or preparing dinners at home, the financial incentive may soon be even greater than ever. I suppose, since there is a lag between when you’ve eaten enough and when you actually feel full, you could also try the peanut-butter portion-reduction trick on yourself. At least when you’re the one doing it, you’ll feel the commensurate reduction in cost, too.



Preet Banerjee, BSc, FMA, DMS, FCSI is a W Network Money Expert, and blogs at wheredoesallmymoneygo.com . You can also follow him on twitter at @PreetBanerjee

Follow on Twitter: @preetbanerjee

 
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