The worst of food inflation is probably behind us. Yes, really.
In recent months, the prices charged by farmers and food processors have slowed from eye-popping increases. This is a crucial development, because those costs are essentially a leading indicator for retail prices.
For instance, the prices received by farmers started to jump in 2021 as Canada experienced the worst drought in decades, among other issues. These rising costs were eventually passed on to consumers.
Price increases for groceries and farm products
Year-over-year percentage change
Farm prices
Groceries
12%
35%
30
10
25
8
20
6
15
4
10
2
5
0
0
-5
-2
2018
2019
2020
2021
2022
2023
Note: Farm prices are brought forward by six months to remove
lag in retail pricing.
the globe and mail, Source: statscan
Price increases for groceries and farm products
Year-over-year percentage change
Farm prices
Groceries
12%
35%
30
10
25
8
20
6
15
4
10
2
5
0
0
-5
-2
2018
2019
2020
2021
2022
2023
Note: Farm prices are brought forward by six months to remove
lag in retail pricing.
the globe and mail, Source: statscan
Price increases for groceries and farm products
Year-over-year percentage change
Groceries
Farm prices
12%
35%
30
10
25
8
20
6
15
4
10
2
5
0
0
-5
-2
2018
2019
2020
2021
2022
2023
Note: Farm prices are brought forward by six months to remove lag in retail pricing.
the globe and mail, Source: statscan
The trend is becoming more favourable. Last month, the Bank of Canada said cost pressures were softening across the food-supply chain, which should bring some relief to shoppers. Farmers enjoyed a better growing season in 2022, with higher yields of key crops, while energy costs have tailed off.
“Historical experience suggests that the recent easing of cost pressures in production and distribution will lead to declines in food price inflation over the coming months,” the central bank said in its monetary policy report.
To date, there has been slight progress. Grocery prices rose at an annual rate of 9.7 per cent in March, down from recent increases of more than 11 per cent. That pace is still uncomfortably steep for many households. Moreover, weaker inflation for groceries does not mean prices are dropping – merely that price growth is slowing.
Cost concerns have not fully subsided, either. On Wednesday, executives at Loblaw Cos. Ltd. pointed the finger at food suppliers – specifically, multinational companies of consumer packaged goods – for “outsized cost increases.”
“We are definitely seeing more inflationary cost pressure from the large multinational CPGs then we would have expected at this time, based on what’s happening in the commodity cost environment,” Loblaw chairman and president Galen Weston said on an investor call.
Decoder is a weekly feature that unpacks an important economic chart.
Matt Lundy