Lower loonie pushes up prices, while consumers look for alternatives to expensive meat
CBC News Does it seem like food is costing more every time you make a trip to the grocery store? A study released Thursday says you’d be right to think your grocery bill is rising — and you should expect more of the same in 2016.
A research team led by Sylvain Charlebois of the University of Guelph Food Institute forecasts that food inflation rates will be two to four per cent in 2016, much higher than the overall inflation rate as measured by Statistics Canada’s consumer price index. That’s after a year in which the cost of meat, vegetables, fruit and nuts jumped more than anticipated, pushing up your food bill by 4.1 per cent in 2015.
‘Canada is the only industrialized country where you find the food inflation rate to be above 2.5%.’– Sylvain Charlebois, University of Guelph
The main driver is the value of the loonie, which has fallen 14 per cent to just above 73 cents US. With 81 per cent of vegetables, fruit and nuts imported from outside of Canada, all of these grocery items are more expensive and are set to become even pricier as the loonie falls further.
Some analysts believe the Canadian dollar will fall to 70 cents US after the U.S. raises interest rates.
The prices of fruit and vegetables are rising quickly because of a low Canadian dollar, according to a study from the University of Guelph Food Institute. (Jacques Boissinot/Canadian)
Here’s what the Food Institute study says to expect in 2016:
|Food price inflation %|
|Category||2016 price increase|
|Fish and seafood||1-3%|
|Dairy and eggs||0-2%|
|Fruits and nuts||2.5-4.5%|
|Overall food costs||2-4%|
Charlebois says the average Canadian household will spend $8,631 on food in 2016, an increase of about $345. That figure includes $2,416 spent at restaurants.
“Canada is the only industrialized country where you find the food inflation rate to be above 2.5 per cent. That’s significant. Right now we are sitting at 4.1 per cent,” Charlebois told CBC News.
“Europe food inflation’s barely at one per cent. There’s too much food in the market. The U.S. inflation rate is much lower than ours. The currency clearly is not helping families that are in need of affordable foods.”
He said Canada has become more vulnerable to currency swings and inflation, because it has allowed food processing in the country to be moved offshore. That’s one reason we are paying more for pasta and bread, even though Canada produces the wheat.
Charlebois said the high prices are hardest on low-income Canadians and people in remote communities, who often have difficulty affording fresh food.
“We need to figure out a way to offer affordable foods to northern communities,” he said.
Climate change and El Nino
Another factor that could affect food prices is climate change, according to the Food Institute study.
The drought in California has pushed up fruit and vegetable prices in 2015, but in 2016 a big El Nino should mean a lot of rain that will restore crops in the U.S. southwest and could help keep prices down. El Nino is a Pacific current that affects weather pattern.
Charlebois is watching several consumer trends that could have an effect on food production in the coming year, among them the trend to local food and a concern about animal welfare and more emphasis on protein alternatives.
Meat prices rose so rapidly over the past two years that consumers have shifted to alternatives, including pulses such as lentils and chickpeas.
“People are looking for local products …,” he said. They’re concerned about the ethical treatment of animals, the ingredients, the naturalization of food.”
Charlebois pointed to decisions by companies such as Kraft and General Mills to put more natural ingredients in food and be more transparent about how ingredients are sourced.
“Throw in a lot of different things that may drive prices — like McDonald’s this year to go cage-free cured chicken without antibiotics — all these things will only drive prices higher,” he said.