There are lots of reasons food prices are up – it’s not necessarily the fault of retailers like Loblaw.LIONEL BONAVENTURE/AFP/Getty Images
Michael von Massow is the OAC chair in food system leadership and an associate professor at the University of Guelph.
Food price inflation persists at levels above 10 per cent even as the rate of general inflation begins to ease somewhat. Meanwhile, retailers are reporting record profits, and politicians and pundits are blaming grocer “greedflation” for driving up prices. Grocery chain CEOs were called to testify before a parliamentary committee investigating the issue Wednesday. This singular focus on retailers, however, is missing much of the point.
It is small comfort, but food price inflation has been higher in many other jurisdictions. Canada’s is among the lowest in the Group of Seven. The rates in developing countries are much higher. This is a global issue, with causes that cut across national borders and differences in domestic policies or market structures.
There are many reasons why food prices are increasing. Extreme weather events and disease, exacerbated by climate change, have disrupted production in many areas. Before Christmas, lettuce prices skyrocketed because of an insect-borne virus that disrupted production in Southern California at a time when most of North America was supplied by that region. Flooding in the Salinas Valley in January caused significant damage to vegetable production and generated price increases of almost 10 per cent for products such as tomatoes that month alone. European consumers are seeing empty shelves due to drought in North Africa and Southern Europe. This matters to Canadians because it makes it more difficult to access alternative sources of product when our primary sources are limited or fail. A lower Canadian dollar and higher transportation costs have put even more pressure on the prices of products coming from the U.S. and other countries.
What’s on your menu of ways to fight food inflation?
The war in Ukraine has also created significant inflationary pressure. Ukraine is a major exporter of wheat and vegetable oil (primarily sunflower oil). Taking those products out of the market has driven prices up – a bad situation made worse by countries like Argentina restricting exports in order to protect domestic consumers. This has caused increases in the prices of products such as pasta, flour and vegetable oils in the range of 20 per cent in the past year. Other products with flour and/or vegetable oils as ingredients are also affected.
The war and the accompanying sanctions have also increased farm input costs. Ukraine and Russia export large volumes of fertilizer. The production and export of fertilizer has been compromised, pushing prices up. Russian exports have become subject to punitive tariffs. The costs of producing crops went up in Canada and around the world. Canadian agricultural prices are largely driven by international markets, and this cost pressure puts additional pressure on food prices.
Topline inflation numbers have been consistently high, but there are many differences at the product level. Pork prices have gone up just 2 per cent in the past year, but flour has gone up 23 per cent (for the reasons outlined above). While lettuce prices are up more than 35 per cent in the past year, they actually went down in January as seasonal production moved away from the area plagued by the virus. The inflation story is more complex than many are presenting.
The Competition Bureau has announced an investigation into grocery pricing, with a report to come out in the coming months. There might have been value in waiting until that report comes out before making the kinds of definitive comments we’ve seen accusing retailers of bad behaviour. While retailers are making record profits, there is little evidence that they are introducing excessive price increases. It is worth noting that shopping volume is up sharply, likely because of inflation, as consumers eat out less. One might argue that retailers could reduce margins to help Canadians, but these profits don’t necessarily mean they are hiding extra price increases.
Food price inflation is hurting Canadians. There may not be a lot that governments can do to buffer these increases, but we can help people understand why it is happening and what the prospects are for relief. A singular focus on unproven “greedflation,” even before the release of the government’s own Competition Bureau report on retail pricing, is doing Canadians a disservice.