Canadian food prices still dropping, while spending is up

Food prices in Canadian stores have declined for nine consecutive months, dating back to last September, as measured by Statistics Canada’s Consumer Price Index.

While the rate of depreciation has slowed since January, Kevin Grier, market analyst and author of the Grocery Trade Review, explains there are two main factors putting downward pressure on the numbers we see in the grocery store:

  1. Increasing competition, based on store square footage growth, market share and other metrics;
  2. Weaker prices for raw commodities six-plus months ago. (He notes there’s a strong correlation between raw commodity prices and grocery store prices half a year or more later.)

Kevin Grier

With an interest rate hike expected, the appreciation of the Canadian dollar in U.S. dollar terms is also putting downward pressure on prices, making imports of raw commodities and finished goods more competitive.

There was speculation earlier this year that the Trump administration’s policies on trade and immigration would lead to higher food prices. While it’s still early, Grier says there’s been no measurable impact to date.

And while prices are still trending lower, household expenditures in Canada on food consumed at home have been climbing, at an increasing pace, for the last five quarters, growing at over 3.5 percent in the first quarter of 2017, according to StatsCan. That means people are trading up, buying more expensive options, which is positive for food retailers, and at least in theory, the rest of the supply chain.

Kevin Grier joined us on RealAg Radio on Friday to discuss the latest trends at the food retail level in Canada:

Related: If anyone can make online grocery sales work, it’s Amazon

 

Kelvin Heppner

Kelvin Heppner is a field editor and radio host for RealAgriculture and RealAg Radio. He's been reporting on agriculture on the prairies and across Canada since 2008(ish). He farms with his family near Altona, Manitoba, and is on Twitter at @realag_kelvin. @realag_kelvin

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