Why Canada’s food inflation may get worse before it gets better

Click to play video: 'How B.C.’s flooding event is affecting farmers'
How B.C.’s flooding event is affecting farmers
Lenore Williams, Director of the Food and Agriculture Institute at the University of Fraser Valley, explains how the devastating flooding in Abbotsford is affecting the agriculture industry – Nov 20, 2021

When it comes to food prices, Canadians may be in for an expensive winter.

Canada’s inflation rate reached 4.7 per cent in October, the fastest rate increase in almost 19 years. Food inflation for the month stood at 3.8 per cent, but as the growing season ends in Canada and the U.S. for many kinds of fresh produce, Canadians may be in for more sticker shock at the grocery store.

Food inflation is notoriously volatile. For example, prices can swing up or down considerably depending on the weather.

And in the winter it’s not uncommon to see produce prices climb by 10 per cent or more simply because they’re being imported from further afield, says Michael von Massow, a food economist at the University of Guelph.

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Click to play video: 'Christmas trees in short supply this season'
Christmas trees in short supply this season

But the supply chain snarls engulfing global trade are complicating the task of keeping Canada supplied with out-of-season fruits and veggies.

Take blueberries. A shipment of them coming from Peru typically takes 10 to 12 days to get to Toronto, says Larry Davidson, CEO of North American Produce Buyers, an Ontario-based buyer and wholesales of international produce.

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These days, though, a container of berries easily takes 20 to 25 days to get to destination, Davidson says.

“For us, as a receiver, we will receive product that will arrive distressed,” he says.

Causing delay is anything from a shortage of containers to backed-up ports, a dearth of workers to load and offload ships, and longer-than-usual wait times for trucks to pick up the produce, according to Davidson.

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One workaround is flying in the fresh, perishable produce, but that comes at a price premium, von Massow says.

High energy prices are also putting upward pressure on food costs, he says. That’s especially true for produce imported from the U.S. and other parts of the world, which has to travel long distances, he notes.

Click to play video: 'Supply chains under scrutiny due to climate impacts'
Supply chains under scrutiny due to climate impacts

Then there’s climate change.

“Climate change is a supply chain issue. The interruption of of production can have long term impacts on both the supply and the price of products,” von Massow says.

A severe drought in Western Canada and the Western U.S. has led to low crop yields in those regions. That, in turn, has forced many ranchers to liquidate their herds, thinning out the supply of animals that will come onto the market in future months, according to von Massow.

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Beef prices in October were already 14 per cent higher than a year earlier, but von Massow believes the increase could grow to 20 per cent or even 25 per cent, depending on how persistent the drought proves to be.

Flooding in B.C. is also having significant repercussions on Canada’s food supply chain.

Disruptions to key transport routes mean farmers in B.C.’s Fraser Valley are currently having to dump perishables like milk and eggs simply because there are no trucks transporting the products to market, says Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University.

“There’s a lot of waste going on, unfortunately,” he says.

Pricier food will take the biggest bite out of low-income Canadians’ budgets, says Pedro Antunes, chief economist at the Conference Board of Canada.

“When we look at household balance sheets right now, they’re in pretty good shape in comparison to where we were even in 2019,” he says.

Click to play video: 'Short Supply: How the supply-chain crunch is affecting consumers'
Short Supply: How the supply-chain crunch is affecting consumers

That’s true even for many lower-earning households, thanks to the COVID-19 income support programs rolled out by the federal government.

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But with those programs now coming to an end, “inflation is eroding away that savings and that extra income that we find very, very quickly,” he says.

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