Hurricanes Ian, Fiona could drive up grocery costs on these items in Canada

Click to play video: 'Hurricanes hit supply chains hard in storm aftermath'
Hurricanes hit supply chains hard in storm aftermath
WATCH: From Hurricane Fiona to Hurricane Ian, Atlantic Canada and parts of eastern U.S. have been devastated at potentially historic proportions. Even for those spared a direct hit, the ripple effect on supply chains may still be felt. Anne Gaviola explains – Sep 30, 2022

Hurricanes Ian and Fiona could have grocers that source food from Atlantic Canada and the southern United States passing higher costs on to Canadian consumers, experts say, as some businesses on the east coast begin to rebuild their battered industries.

Any disruption to supply chains, which have seen major improvements in shipping costs and reliability over the past six months, is thankfully expected to be brief.

“The effects of things like hurricanes tend to be short-lived,” Fraser Johnson, professor of operations management at Ivey Business School, tells Global News.

That could be cold comfort to Atlantic Canada’s fishing industry, which was devastated when Fiona, classified then as post-tropical storm, hit the east coast this past weekend.

Entire harbours in Newfoundland’s Port aux Basques were washed off the coast as two-metre-high storm surges hit the shore and will need to be rebuilt. Others have seen fishing equipment and entire ships washed out to sea or beached on land.

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Click to play video: 'Storm Fiona: Newfoundland’s Port aux Basques devastated by massive waves'
Storm Fiona: Newfoundland’s Port aux Basques devastated by massive waves

Fisheries Minister Joyce Murray said Thursday that it will take more time to assess the full extent of the damage to the fishing industry, but added she’s willing to work with fish harvesters across the region on requests for a season extension.

Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University in Halifax, experienced the damaging winds and torrential rain from Fiona first hand, recalling in an interview with Global News how the storm hit in the middle of the night and left his home without power for five days.

For residents in Atlantic provinces, lengthy power outages mean short shelf lives for food in fridges and freezers. The need to throw out food comes at a costly time for households, as costs at the grocery store were up 10.8 per cent annually in August, a new 41-year-high.

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Charlebois says he was glad to see Nova Scotia offer $100 to help families who lost power in the storm replace spoiled food.

“It sends a strong signal that food and food security is very important for the province,” he says.

Weak Canadian dollar to compound supply chain snags

Charlebois says that September is perhaps the worst time for a major storm to hit the east coast from an agricultural perspective, as crop harvests could be delayed or lost entirely at some farms.

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The potato harvest was well underway in Prince Edward Island when the storm hit, he notes.

“P.E.I. is the largest potato supplier of all provinces in Canada. So obviously potato production will be impacted by Fiona,” he says.

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Residents of the Maritime provinces could also be stuck waiting longer on supplies if roads and other shipping routes are disrupted by downed trees and debris, Charlebois adds.

A spokesperson with the Halifax Port Authority confirmed to Global News in an email this week that the shipping hub resumed operations on Sunday morning after a brief pause for Fiona’s landfall, adding that no cargo vessel deliveries had to be cancelled.

Ian’s destruction in Florida and other parts of the States pushed companies with operations in the region to pause some activities.

This includes Amazon, which said this week it would close some of its sites in Florida, as well as agri-food giant Cargill, which shuttered some facilities in the state.

Click to play video: 'Hurricane Ian slams Florida with extreme winds and storm surge'
Hurricane Ian slams Florida with extreme winds and storm surge

Analysts also told Reuters this week that hurricane Ian is expected to worsen what was already expected to be the smallest orange crop for the state in 55 years. Orange juice futures have jumped in the last three trading sessions as a result.

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In addition to citrus products, Florida is a critical source for Canada when it comes to avocados and other fresh foods, Charlebois notes.

Canadian importers will adapt to the disrupted supply chains out of Florida and find other producers to offset the loss, Charlebois says, but that might come at a cost.

The Canadian dollar has fallen to a two-year low compared to the surging U.S. dollar, giving importers less purchasing power when negotiating new supply contracts.

“We do import a lot of food from Florida. And as we are looking at Ian’s wrath, we are expecting some problems there,” Charlebois says.

“When that happens, you have to go elsewhere. And when you go elsewhere to procure whatever you need, you’re likely to pay more … That will actually impact retail prices eventually.”

It’s not only direct hikes on import costs that can see major storms inflate prices at the grocery store, Ivey’s Johnson says.

The Gulf of Mexico is home to numerous oil and gas wells, which can have knock-on impacts on gasoline prices when disrupted. BP and Chevron are among the producers who removed staff from their oil platforms in the region earlier this week ahead of Ian’s arrival.

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Regular gasoline prices jumped as much as 19 cents in the past day in some Canadian cities and hit a record 239.9 cents per litre this week in Metro Vancouver; an expert from CAA pointed to impacts from the two storms disrupting gas deliveries for some markets.

Click to play video: 'Hurricane Ian: Biden warns oil companies not to use storm as ‘excuse’ for price gouging'
Hurricane Ian: Biden warns oil companies not to use storm as ‘excuse’ for price gouging

Johnson tells Global News that higher gas prices seep into grocers’ profit margins as trucking and logistics companies pass the fuel surcharges on to the stores themselves.

“As a result, they’ve got to pass these costs on to consumers,” he says. “You may see some short-term spikes in terms of the cost of your groceries.”

In addition to bigger grocery bills, Johnson says there could be demand-driven price spikes in lumber and other supplies as materials required for a rebuild are needed to repair homes and other buildings damaged in the storms.

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Supply chains in better condition now than last year

Johnson says that while the impact of major storms on supply chains can be intense, they also “tend to be short-lived.”

“Supply chains tend to recover from short-term disruptions pretty quickly. So anything that you might see in terms of spikes in energy prices or even food costs are not going to be with us two or three months from now,” he says.

And while the pair of hurricanes could cause an acute pinch for some Canadian importers, from a wider perspective, experts say global supply chains are in a much better position today than they were this time last year, when Canadians were being warned of shortages ahead of the holiday shopping season.

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

The lifting of COVID-19 restrictions has made shipping much more “predictable” than even six months ago, Charlebois says. Compared to then, overseas shipping rates are typically 40-50 per cent lower today and trucking costs are up to 20 per cent cheaper, he says.

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“Things are less complicated, which is helping when you have to deal with something like a hurricane,” Charlebois says.

Johnson agrees, and says most retailers are in a “much, much better position this year compared to where they were last year.”

While shortages on some critical equipment such as semiconductors are still a concern, retailers such as Walmart and Target are reporting overstocked inventories heading into the fall.

As a result, Canadians might find deals in the weeks ahead, he says, as retailers look to get rid of their existing supply and make room for holiday inventory.

— with files from Global News’ Anne Gaviola, the Canadian Press’s Rosa Saba and Reuters

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