Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

Higher gasoline prices mean that even discount chains have been squeezed. (Glenn Lowson/Glenn Lowson for The Globe and Mail)
Higher gasoline prices mean that even discount chains have been squeezed. (Glenn Lowson/Glenn Lowson for The Globe and Mail)

Economy Lab

Food inflation: It's all about what's on your plate Add to ...

A couple of week ago, I blogged on food inflation in Canada, noting that, so far, food prices are not galloping higher like in other countries. Part of the reason is the aggressive expansion of chains like Wal-Mart, which are causing competitors to slash prices.



Readers did not agree. Official numbers may show that food prices are up a scant 1.7 per cent from a year ago, but that hasn't been the experience of many people looking at their grocery bills in horror.

More related to this story



Given the experience of rising food prices the world over -- and the pressure it is putting on households, particularly in emerging markets -- it seems well worth taking a deeper dive into what's going on in Canada.



First of all, changes in food prices are not uniform, and inflation varies according to what you consume. If a large part of your diet relies on ham, or bacon -- prices have surged 8.6 per cent from a year ago. Prices for sugar and confectionery have soared by a similar amount.



It's a different story if consumption relies more on produce -- tomatoes and lettuce prices are about 21 per cent lower than a year ago -- or on fish, which has also gotten cheaper compared with year-ago levels.



Inflation may also differ according to incomes. The poor in Canada -- who already spend a greater proportion of their incomes on necessities -- are seeing a faster rate of food inflation, according to research by social services consultant John Stapleton. That's because they typically rely on high-calorie items that don't quickly perish -- like grains and processed meats, which are also more widely available at convenience stores. As the accompanying chart shows, those are the very areas where prices have risen the most.



The poor "often cannot access supermarkets, sometimes don't have access to secure cooking facilities, adequate freezing and refrigeration space," he says.



Low-calorie foods are rising the least, while high-calorie items, which include fast food, are advancing the most, says Mr. Stapleton, who holds the innovation fellowship at the Toronto-based Metcalf Foundation.



Secondly, Canada is not immune. Prices for some goods -- like sugar -- are already heating up. And a growing number of economists and retailers expect higher prices this year.



Rising commodity prices will boost food inflation in Canada to about the 5-per-cent mark later this year, Capital Economics said last week (though it expects the surge will be temporary).



Typically, there's a 10-month lag between food prices at the commodity level and those at the consumer level, Bank of Montreal noted. "If past relationships hold, the recent runup in commodities will lift Canadian food prices by about 6-to-7 per cent by the end of 2011," it said on Jan. 26. "The strong Canadian dollar may help dampen that a bit, but don't expect major relief on that front."



Grocers are getting ready to hike prices. Metro Inc., Canada's third-largest grocer, has said it expects to boost prices in the next month or two, in areas like bread, pasta, rice, oils and coffee, because suppliers are hiking rates in the face of rising commodity costs.



Canadian food inflation is nowhere near that of India, where food prices such as onions have skyrocketed 16 per cent. That said, it's more than likely that a growing chunk of Canadians' household budget will go to putting dinner on the table.

Follow on Twitter: @taviagrant

 

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories