Food price inflation has likely hit its peak in Canada, according to experts, despite sustained record highs, which they predict will ease in the coming months.
On Tuesday, Statistics Canada reported another record high for food inflation: prices up 9.2 per cent in July (9.9 per cent for groceries and 7.3 per cent for restaurants) compared with July last year. The previous two months each saw annualized increases of 8.8 per cent.
But experts say the worst is likely behind us.
“I think we’ve hit our peak,” said Simon Somogyi, a University of Guelph food business professor. “Things have started to cool down.”
This is because many of the factors responsible for driving up food prices earlier this year have begun to ease, he said. Fuel prices, which skyrocketed in early 2022 – a major driver behind food price hikes – 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. Major shipments of Ukrainian grains began flowing out of the region earlier this month.
Prof. Somogyi said prices in grocery stores should begin to reflect this by the fall, but with two major exceptions: dairy and baked goods.
Earlier this year, the Canadian Dairy Commission announced another price increase – its second for 2022. In February, the CDC hiked milk prices by 8.4 per cent. According to Statistics Canada data, the cost of dairy products rose 8.1 per cent in July compared with last year. And at the beginning of next month, milk prices will increase by another 2.5 per cent.
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This is, one expert says, despite the fact that the cost of milk production dropped last year. Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University, said the cost of producing milk was actually cheaper by 1 per cent in 2021.
But a spokesperson for the CDC said the decision for the upcoming price hike was made based on 2020 figures – not 2021. She said the 2021 figures cited by Prof. Charlebois are only preliminary, and have yet to be made public for that reason.
With bakery products – and other items based on wheat, such as pasta – prices will remain high for the time being, Prof. Somogyi said. This is because those prices are generally locked many months in advance, and take at least as long to catch up. Statistics Canada data show bakery prices up 13.6 per cent for July, compared with last year. And pasta was up 20 per cent.
Still, for most grocery store aisles, “things seem to be softening quite a bit,” said Prof. Charlebois.
He said the volatility caused by events over the past few years – the COVID-19 pandemic, extreme weather and Russia’s invasion of Ukraine – resulted in an unpredictable environment for grocers. And that pain was passed on to consumers.
“It’s harder to plan and offer discounts and rebates and loss-leading products to consumers when you have no idea what lies ahead next week, or even in the next day,” he said. “Now things appear to be calming down.”
Prof. Charlebois publishes the Canada Food Price report each year, which in December predicted a 7-per-cent increase for 2022. He still believes this is possible.
The timing helps. In the coming weeks and months, more and more Canadian field-grown fruits and vegetables will begin to hit grocery store shelves, continuing to put downward pressure on prices.
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Also helping matters is the weather. Last year, drought across Western Canada caused crop production to plummet. But as farmers prepare for harvest this year, many are expressing optimism.
“North America [in general] is doing well,” said Prof. Charlebois. “Mother Nature is co-operating … and things are looking good.”
Greg Sears, a grain and oilseed farmer near Grande Prairie, Alta., begins his harvest next week. He said he’s expecting a “reasonably decent” crop.
“I think we’re going to see a return to average,” he said. Commodity prices for his product, he said, are down about 25 per cent from the peak earlier this year.
“This bodes well for the customer in the price of food, theoretically – if that gets passed on to the consumer.”