Food prices in Canada are forecast to rise between 3 and 5 percent in 2017 — larger than last year’s price increase and higher than what is considered as “acceptable” food inflation, according to the 7th edition of Canada’s Food Price Report.
Led by Sylvain Charlebois, food distribution and policy professor at Dalhousie University, the study offers several reasons for why food prices could jump in the next year, with the two most influential factors being a falling Canadian dollar and year one of the Trump administration:
- The “Trump effect” — the possibility of protectionist trade policies and tighter immigration/foreign labour rules could result in higher food prices, note the authors. “U.S. agriculture has an estimated 2 million illegal workers helping farming operations throughout the year and during harvest. Without such support, U.S. production levels will be negatively affected and could push prices higher.”
- Currency — the Canadian dollar is seen losing value versus the U.S. dollar with the U.S. Federal Reserve raising interest rates, making American imports more expensive.
- Carbon tax/pricing — the Canadian and provincial governments’ plans to implement a price on carbon will raise the cost of producing/transporting food (although the federal carbon tax deadline is in 2018.)
- Weather — the switch from El Nino to La Nina could provide relief to food production on the West Coast, but it could also result in supply disruptions.
- Competition between retailers — Loblaw, Sobeys and Metro are under pressure from Walmart and Costco. Save-On-Foods is also planning to open as many as 40 stores in Manitoba and Saskatchewan over the next three to five years.
- Hog futures suggest pork prices will rise in 2017, while growing beef demand is expected to support beef retail prices. Chicken prices are forecast to remain flat, while growing demand is seen supporting higher prices for fish and seafood.
Provincially, Ontario and B.C. are expected to see the largest increases. Alberta, Manitoba, Quebec, New Brunswick and Newfoundland and Labrador are forecast to see below average increases due to weaker economies and/or more competition in food distribution.
According to Charlebois and his colleagues, the “proverbial sweet spot” for food inflation is between 1 and 2 percent per year. “Such a threshold is manageable by all stakeholders and allows the industry to provide higher quality products at an affordable price,” they note.
Read the Canada’s Food Price Report 2017 here.