The Price of Food
Get ready: food inflation will remain for the foreseeable future.
No one likes to hear that they need to spend more on food.
Most of us of are pretty stretched as it is. If we need to spend more on food, we will need to give up spending elsewhere. A lot of us already have. The thing is though, food is a necessity. It’s hard to scrimp on food when we need to feed ourselves. So, we don’t. It’s everything else that becomes a target for reduced spending.
Sadly, I don’t see a lot of good news on the horizon regarding food prices. In fact, what I see makes me conclude that food prices will continue to rise.
Just looking at Statistics Canada data over the past 3 years reveals a troubling picture of a constantly rising consumer price index.
In order to address this troubling picture, the Federal NDP decided to mount a theatre production whereby they laid the entire blame for higher food prices at the feet of retail grocery CEOs in Canada. While generating a lot of heat on an issue that doesn’t factually exist, their antics at least had the effect of galvanising the House of Commons permanent Agriculture Committee to hold hearings between December, 2022 and April, 2023. The resulting report is an excellent overview of the main issues affecting the price of food in Canada.
Unlike the Federal NDP — who remain fixated on the singular position of blaming it on ‘greedflation’ (a position that flamed brightly, but all so briefly, and offered nothing for consumers in terms of a plan to construct greater resilience in our food system in Canada) — the report identified multiple causes of food inflation in Canada:
- The cost of inputs — these are everything that gets consumed by farmers and producers to produce primary food products. These include fuel, fertilizer and feed for farm animals. These costs have increased — over the period of Q1 2020 to Q3 2022 — by 82%, 84% and 56%, respectively.
- Labour Availability — as most people know by now, there is a labour shortage across the country. The food system is not immune from this, as the shortage of labour for food processing, trucking and retail show. If there is a labour shortage in processing, for example, less gets produced and what is produced is sold at a higher price as a result. Wages tend to be higher, which is good for the employees and the economy in general, but those costs are passed along to the consumer in the price for the good produced.
- Supply Chain Disruptions — strikes at major ports, rail disruptions due to protests, the struggle for transportation companies to adjust post-pandemic, the war in the Ukraine — all these are contributing to disruptions in domestic and global supply chains that have a direct effect on the food system in Canada. The supply chain task force (struck post-pandemic in 2022 by the Federal Government) published a number of recommendations to be taken at the Federal-Provincial level to address these, but so far, no action has been taken.
- Taxation & Import duties — the imposition of carbon pricing — while laudable for achieving overall reductions in the use of fossil fuels — has a direct impact on farmers, who still depend on fossil fuels to power their equipment. Add to this the import tariffs slapped on Russian imports of fertilizer products — a significant source for Canadian farmers — and you have a financial system that, without providing any counter-balancing measures (such as exemptions for farmers, or subsidies for fertilizer purchases), increases the overall price of primary agricultural products.
The report did address corporate profits, that bugaboo of the NDP. It concluded that, although certain sectors of the economy showed higher than normal profit taking since 2021, the evidence presented concerning the retail grocery sector was lacking. It recommended the Competition Bureau take further action, if it could find clear evidence of profit-taking by the sector as part of its ongoing study of the retail grocery sector.
The one area of the report that, frankly, got short-shrift, was the effect of climate change. There was a mere two paragraphs about ‘extreme weather events’ having an impact on agricultural production, and no recommendations for government.
This, for me, is a big hole in the report, and a slap in the face of every farmer out there having to deal with extreme heat, drought, monsoon rains and depleted water supplies.
The list of the effects of climate change on major crop-growing regions around the world is getting longer and longer, particularly during the current year. Here are some examples from around the world just this year:
- Yields of pears from Italian orchards are down by 63% in 2023; in France, it’s 23%. Other crops like wheat and milk, are down 10% and wine grapes are down by 14%. For lovers of olive oil, get ready for price hikes, as the extreme heat is stressing olive trees throughout Europe, particularly in Spain, where most of our olive oil is sourced;
- The climate in China this year has been one of extremes: long weeks of high heat & drought, followed by monsoon-like rains, which are flooding croplands. Torrential rainfall hit the central province of Henan, China’s top wheat producer, right before harvest time in May. The prolonged downpours flooded wheat fields, causing pre-harvest sprouting and blight. The harvest is down by 0.9%, the first time it has decreased in years;
- In some parts of Saskatchewan, drought is now in its fifth year, leading Canola farmers to wonder how long it will last, and contemplating the result of stunted plants, burned flowers and crops that have to be harvested a month early, just to get some income from the land;
- The whiplash effect of high heat and drought, followed by monsoon-like rains is affecting the wheat crops in Kansas as well, as farmers struggle to get off what they can after a chaotic growing season;
- Spain was hit hard this year with not one, but two major heat domes. This has led to water reservoirs drying up, resulting in significant yield declines in a number of agricultural crops, such as peaches, nectarines and mangoes; and
- Last, but not least, Quebec got more rain during the summer than it usually does, soaking fields, stunting growth and leading to anemic crop yields on a variety of items, including broccoli, raspberries and strawberries. Roots rot with too much moisture, and farm machinery sinks into the mud, making it impossible to maintain the fields or crops that are left.
These examples are starting the call for governments to work with farmers and devise plans and strategies to make our food system more resilient quickly, before we lose our ability to produce enough food for our basic needs.
All of the elements identified by the House of Commons Agricultural committee will likely continue into the near future: labour will remain difficult to find, farming inputs will remain costly, supply chains will take years to rebalance and taxation/duties policies will likely remain not dealt with, given how the Federal government seems to be stuck in a period of inaction at the moment.
But climate? That underpins everything. If farmers cannot even produce basic, staple crops — crops that are used as an input in just about everything else we eat — all the other factors don’t matter. Not one bit.
Until governments sit down with farmers and start putting together plans on how to stabilize the food we produce, food prices will continue to rise, either because of a shortage of supply due to climate change, or a combination of all the factors noted above.
Consumers are cottoning on to the issue. In a recent survey conducted by the University of Dalhousie’s Agri-Food Analytics Lab, fully 61% of Canadians ‘fear climate change is affecting the country’s ability to grow food’.
There are plenty of things our Federal and provincial governments in Canada can do. I’ve written about some of the more immediate measures they could take. In addition, the supply chain task force provided plenty of recommendations for the government work on to smooth out our supply chains. They identified their intent to work on a national supply chain strategy, informed by the report generated by the task force in 2022; so far, no action has been taken.
In addition to their inaction on supply chains, they have been negligent in even having a public debate about our food system, or how they intend to work with farmers and producers to ensure we continue to grow enough food. They willingly implement measures to combat climate change, without addressing how those measures affect food production, or how food production can be enhanced and made more resilient.
Until they show an actual interest in the food system itself, food prices will continue to rise. And no matter how many cheques they send to consumers — welcome as they may be — it still won’t solve the underlying problem. Canadians deserve better from their governments. Farmers deserve better from their governments. Let’s hope they see the light soon.
