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Sobey's Queensway store in Toronto on Apr. 3, 2020. Canada’s Food Price Report says the cost of groceries will increase by 5 to 7 per cent in 2023.J.P. MOCZULSKI/The Globe and Mail

Food costs in Canada will continue to rise over the next year, with the average family of four expected to pay an additional $1,000 for groceries in 2023, according to an annual report on prices.

Canada’s Food Price Report says the cost of groceries will increase by 5 per cent to 7 per cent in 2023, compounding the financial burden of a year of record-high food inflation that saw prices climb 10.3 per cent between November, 2021, and September, 2022.

By way of comparison, in its October Monetary Policy Report, the Bank of Canada said it expects the consumer price index to fall to about 3 per cent by late 2023.

The average family of four, who paid more than $15,200 for food in 2022, will pay more than $16,200 next year for the same groceries, the report said.

The main drivers of that increase are the continuing effects of the pandemic, supply-chain disruptions, the war in Ukraine, high transportation and labour costs and climate change.

“We were hoping to have better news for Canadians given the difficulties experienced in 2022, but our models tell us a different story,” said the report, published Monday by Dalhousie University, the University of British Columbia, the University of Guelph and the University of Saskatchewan.

Grocery prices are rising at the fastest rate in 40 years

One food category in particular is expected to see a higher-than-average increase: vegetables. The report predicts a price hike of as much as 8 per cent over the next year.

“We’re still seeing significant issues on the West Coast of the U.S., particularly California – with droughts and with bacterial contamination,” said Simon Somogyi, a food business professor at the University of Guelph and one of the report’s authors.

And though fresh produce from other markets has already begun to appear in Canadian stores (most notably, lettuce from Arizona), he said prices will likely take some time to level off.

“We’re really still feeling the effects of limited supply and higher prices throughout the West Coast of the US., and I think we’ll continue to see that over the next four months.”

In addition, another major factor could result in even higher prices – beyond the report’s forecasted 7 per cent, said Sylvain Charlebois, the director of the Agri-Food Analytics Lab at Dalhousie University and another one of the report’s authors.

“There’s a lot of things happening right now. But the currency, I’d say, is the really critical piece,” Prof. Charlebois said.

The Bank of Canada’s interest-rate decisions in the coming weeks and months – and the impact of those decisions on the Canadian dollar – will also affect food imports.

More than 75 per cent of fresh vegetables sold in Canada are imported, with more than half of those imports from the United States. And 37 per cent of imported fruit comes from the U.S.

“The first half [of 2023] is likely going to be about the dollar, interest rates, the start of a global economic slowdown – an extension of 2022,” Prof. Charlebois said.

But after that he predicted some relief for consumers.

“The second half, for families on a tight budget, appears to be more promising,” he said.

While prices won’t likely fall, the report predicts, they’ll likely begin to level off.

“We do see the light at the end of the tunnel,” Prof. Charlebois said. “We just don’t know how long the tunnel is.”

Last year, the report predicted food prices would climb as much as 7 per cent over the course of 2022; instead, they rose at the fastest rate in decades – more than 10 per cent between November, 2021, and September, 2022.

That, according to this year’s report, can be blamed in large part on Russia’s invasion of Ukraine. The conflict set off a domino effect across the global supply chain and led to higher prices for everything from fuel and transportation to animal feed and fertilizer. As a result, the price of food – everything from pasta to bread to oils – skyrocketed around the world.

“That just blew everything out of the water,” Prof. Somogyi said. “We just couldn’t have predicted that.”

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