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Marcelle Faucher for The Globe and Mail

PRICE CHECK

Canadians are paying more at the check-out line, even as global food prices decline. What’s behind the price hike? And is any relief on the way?

When Atif Kubursi was researching Ontario’s food system a few years ago, he made a curious discovery: The same trucks that were hauling large bags of Ontario carrots for sale down in Florida were transporting bags of U.S. carrots back up to Canada.

“The Americans prefer the better-tasting [Canadian] carrots. And Canadians prefer better-looking American carrots,” the McMaster University economics professor said, noting that Canadians import some foods unnecessarily.

Over the past few weeks, Canadians have been hammered with headlines warning of skyrocketing food prices: the famous $8-cauliflower and a 30-per-cent hike in the cost of beef. And although some of those sudden spikes can be explained by one-off events expected to level off over time – extreme weather like a drought in California, or a plunging Canadian dollar – Prof. Kubursi’s observation that Canadians import food they don’t need to is key to understanding the bigger picture.

The trend is that, while global food prices have dropped steadily over the past five years, Canada has been the outlier, with prices increasing. But although experts expect another price hike next year, they say there’s no need to raise alarm bells yet – that relative to other countries, Canada is still doing well in terms of affordability.

Over the past five years, overall food costs as measured by the consumer price index have outpaced inflation, rising between 1.4 and 3.7 per cent each year, according to Statistics Canada. That means the bill for a bag of 16 grocery items – all of them recommended in Canada’s Food Guide as part of a healthy diet – now costs $70, up from $59 in 2011.

A decline in Canada’s fruit and vegetable production is largely to blame for this, said Evan Fraser, Canada Research Chair in Global Food Security at the University of Guelph.

“We used to be fairly self-sufficient in fruit and vegetable categories,” he said. But after the North American free-trade agreement removed key protections for local growers, many of the country’s large food-processing companies headed south. Many local farmers who used to rely on these companies as stable buyers for their fresh produce, Mr. Fraser said, moved to other crops.

A 2014 study from Ivey Business School found that Canada lost 143 food manufacturing facilities between 2006 and 2014 – although 63 new plants opened in that same time. Meanwhile, the area dedicated to vegetable production in Canada has declined by over 34,000 hectares since 2001.

As a result, Canada has become increasingly reliant on imported food – and increasingly vulnerable to fluctuations. “This amplifies the extent to which our food prices are exposed to international trends and things like the price of oil and currency,” Prof. Fraser said.

Prof. Kubursi, meanwhile, said the carrot example is just one of many that show Canadians need to rethink their food choices to better match local consumption with local production. He acknowledged that food choices are a matter of personal taste, but said that better education – including labelling local products – could be key.

Others, like University of British Columbia food economics professor Jim Vercammen, point to grocery retailers’ preference for partnering with large, reliable suppliers over smaller local ones. “The big stores don’t like to deal with inefficient supply chains – they like the big trucks that come from California every second day,” he said. “They unload, and don’t have to worry about seasonal effects.”

People shop at the Loblaws at Maple Leaf Gardens in Toronto in 2014.

People shop at the Loblaws in Toronto’s Maple Leaf Gardens in 2014.

Matthew Sherwood for The Globe and Mail

The rising prices have raised concerns that the most vulnerable populations are the ones hit the hardest: lower-income families and the homeless. And in northern places like Nunavut, where affordability has long been a pressing issue, rising prices have only exacerbated the problem.

Groups such as Food Secure Canada urge the federal government – and agriculture minister Lawrence MacAulay, who was recently mandated by Prime Minister Justin Trudeau to develop a national food policy – to strengthen support for local agriculture beyond export-driven commodities.

A statement from Mr. MacAulay emphasized the products that are grown domestically. “Canada is a major exporter of agricultural products like grains, oilseeds and red meat, and a lower Canadian dollar keeps our export sales strong and supports farm incomes,” he said.

The minister also described prices, despite recent hikes, as “reasonable” – an assertion echoed by Sylvain Charlebois, a professor with the University of Guelph’s Food Institute.

Prof. Charlebois, who released a report last month on rising food prices, said Canada is still doing relatively well in terms of affordability. He pointed to data from the U.S. Department of Agriculture, which showed that just over 9 per cent of Canadians’ average consumer spending in 2014 went to food consumed at home. In its worldwide ranking of food affordability, the USDA found Canada fifth overall.

He said that retailers could also be part of the reason why prices have been going up. For decades, Prof. Charlebois said, competition in the grocery retail market resulted in price wars. “The whole focus was about prices and about making food prices as low as possible,” he said.

But in the past few years, “we’ve started the era of strategic focus,” with each retailer concentrating on its own specific strategy – Sobeys on logistical efficiency with its acquisition of Safeway, and Metro targeting more upscale markets.

“Now the fascination is not so much about food prices, but more about quality and diversity,” he said.

And to Prof. Charlebois, rising prices might not be a bad thing. Higher prices, he said, might increase the currency of food in general, and lead people to pay more attention and ask more questions about the products they put in their carts.

“I would say for decades in Canada, we were dealing with a marketplace that not only made food cheap, but actually marginalized it,” he said. “Basically, food was competing against the best TV available, trips to Cancun. It’s different now.”




--The U.S. Department of Agriculture, which ranks 85 countries on food affordability, placed Canada fifth overall in 2014. That list found the average Canadian spends 9.3 per cent of their consumer expenditures on food consumed at home – or $2,506 (U.S.) each year. The U.S. came in first on that list, spending just 6.5 per cent on food. The average resident in Nigeria – the worst-ranked country on the list – spends 56.6 per cent on food.

--In the past five years, the Food and Agriculture Organization of the United Nation’s food price index measuring global prices has dropped by about 12 per cent. In the same period, Canada’s consumer price index for food has risen between 1.4 and 3.7 per cent each year.

--Food prices are expected to rise again in the next year between 2 and 4 per cent, according to University of Guelph researchers – meaning the average Canadian household could spend an extra $345 on food. The researchers predicted the biggest price hikes for meat (mainly beef and pork), as well as fruits and nuts – forecasting an increase between 2.5 and 4.5 per cent. Other products, like dairy and eggs, are expected to remain stable.

--In a University of Guelph survey, nearly 38 per cent of respondents said they have reduced or stopped eating beef in the past year – 62 per cent of whom said that choice was made for financial reasons.

--According to the Ivey Business School, 143 food plants shut down in Canada between 2006 and 2014. And, since 2001, Canada has lost over 34,000 hectares dedicated to vegetable production.

-Ann Hui

Checking up on the stalk market

Celery may be one more item consumers remove from grocery baskets this winter.

Its price has climbed steadily: One kilogram of celery cost $2.48 at the end of 2011 and $3.79 in December, 2015. In the span of two months last year – from October to December – the cost of a kilogram of celery jumped by $1.24.

Celery is rich in vitamin K, folate and fibre, as well as other nutrients. And it’s not the only vegetable whose price is rising.

Cauliflower, which has become recently trendy, costs upwards of $8 in certain urban centres.

Such steep cost inclines say more about Canada’s economy than popularity on the shelves, though. Astronomical prices for fresh greens stems partly from a fragile Canadian dollar.

The loonie, currently sits at roughly 71 cents (U.S.) The state of the dollar has helped raise produce prices by 11.5 per cent since 2014.

High food prices are particularly felt by those who fall below the poverty line, along with people living in northern hemispheres where prices are even more inflated.

Canada imports a large portion of its vegetables from the U.S. and other regions of the world during the winter months. The drought that’s stricken California has caused smaller yields on farms, resulting in premium prices across the border.

California is a key source of Canada’s fruits and veggies – including celery.

“What’s driving food inflation for 2016 will be vegetables and fruits,” said Dr. Sylvain Charlebois, professor of marketing and consumer studies at the University of Guelph. “We are expecting food prices in that part of the grocery store to increase by four to 4.5 per cent.”

Dr. Charlebois acknowledged Canada’s dependency on California’s vegetable and fruit markets during the off-season but also emphasized climate change. “Our economy,” he said, “is highly vulnerable to these two factors right now.”

However, Dr. Charlebois mentioned that the effect of the El Nino weather pattern this winter could bring more warmth and moisture to California, creating the possibility of more agricultural output.

“We haven’t benefited from El Nino, at least from a food consumption perspective, yet.”

-Julien Gignac

Watch: Three surprising places in the grocery store where you can get a good deal

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