Canada’s Food Price Report forecasts an increase in food costs

Food prices for 2020 are expected to increase, according to Canada’s Food Price Report by the University of Guelph and Dalhousie University. Overall, they predict that food prices will increase by two to four per cent, costing the average family an extra $487 for the year. The average household food expense is predicted to cost $12,667 for 2020.

The cost of vegetables, meat, seafood and fruit is expected to rise. The highest category is meat, which is expected to rise four to six per cent. Seafood and vegetables are expected to rise two to four per cent, while fruit is to rise by 1.5 to 3.5 per cent. Bread is the only category that may not see a rise, with a maximum anticipated change of two per cent.

Between October 2018 and September 2019 vegetables saw an increase of 12 per cent, which was far off from the anticipated increase of four to six per cent. Bakery, dairy and fruits saw a two per cent increase while meat and seafood saw a three per cent increase. Last year the report anticipated a 1.5 to 3.5 total increase for food costs, which resulted in the top number at a 3.5 per cent increase.

In 2019, the Bank of Canada left the target interest rate untouched at 1.75 per cent, protecting against economic uncertainties. Wages remain while the cost of food and living continues to rise.

The report expects Alberta, Saskatchewan, New Brunswick and Nova Scotia to have below-average food inflation rates. Due to stronger economic forecasts, it is predicted that Quebec, P.E.I., Manitoba and British Columbia will see higher than average food inflation rates.

Environmental factors

Last year, the report predicted a decrease in meat and fish due to the demand for plant-based meats and the volatile seafood market. The prediction for 2019 wasn’t correct, seafood and meat saw a price increase of five per cent. Reports of salmon in show a 23 per cent increase in consumer price index (CPI) change for salmon and its affiliated products. The changing ecosystem and rising water temperatures in the Pacific Ocean have led to fish being on the brink of global collapse.

A primary reason for the increase is due to climate change. Weather patterns such as rising sea levels, forest fires, heavy precipitation, droughts and decreasing freshwater access have an impact on the Canadian food system.

Due to climate change, Canadian farmers will have challenges with crop yields, heat waves, pasture availability and pest and disease outbreaks. But there are potential benefits if managed properly, such as improvement to soil health by enhancing carbon sequestration process and reducing greenhouse gasses through land-use changes. Roughly 10 per cent of Canada’s greenhouse gas emissions are from crop and livestock production, excluding emissions from the use of fossil fuels or from fertilizer production. The food sector has challenges with climate issues, global population growth, and increasing demand for more and higher quality food products with the question of sustainability. The report expects these issues to intensify in 2020.

Consumers are motivated to reduce waste through single-use plastics. A study from Dalhousie University found that 93.7 per cent of Canadian respondents had a strong personal motivation to reduce the consumption of single-use plastic packaging. However, the same population was less inclined to pay more for alternative packaging solutions. A solution for manufactures can apply circular economy methods to avoid punitive cost offsets to consumers for more expensive and environmentally friendly packaging solutions.

Health

Canada’s Food Guide saw some changes in 2019, recommending less meat and dairy and encouraging diets with high fruits and vegetables, whole grains, and plant-based proteins. With this, there is a growing interest in plant-based alternatives. This gives optimism for meat prices by creating a new class of substitutes, but global demand for meat outside Canada will increase domestic prices in 2020.

The report points out that the food guide has faced criticism for excluding considerations from key industry stakeholders. Also, the guide has faced criticism of the lack of consideration regarding food insecurity and it does not ensure that Canadians have sufficient income to access the foods recommended in the new guide. This brings up the issue of food security; with over four million Canadians are food insecure, which includes over 1.15 million children.

Canadians are paying a premium for fruits and vegetables, which rose 17 per cent in 2019. Romaine lettuce from California caused an E. coli outbreak, which caused an increase in demand and price for alternative vegetables.

World economy

In 2019, Canada faced trade barriers with China. This was due to Canada’s position on its extradition treaty with the U.S. for a high-level Chinese executive arrested on Canadian soil. China banned the importation of key Canadian food and agricultural products and placed import limits on Canadian canola products, blaming pest contamination. African Swine Fever (ASF) caused a problem in China, which wiped out their pork population. China is responsible for half of the world’s pork consumption. ASF caused pork prices to increase, which led to consumers finding alternative protein sources. China imports 40 per cent of Canadian canola, making China the largest importer. China put a standstill on all meat imports from Canada, while soybeans and peas faced export pressures as well. Canada is expanding its trading activities, exports to the United Arab Emirates has increased by 533 per cent.

Business of food 

In Canada, major acquisitions and mergers have increased in the food and beverage and agri-business because of their critical role in the global economy. The world increasingly relies on countries like Canada for its food supply and emerging markets create optimism for domestic companies and their ability to access markets with high growth and rising incomes. Canadian food and agriculture companies are looking for market opportunities, but want to keep product costs low for consumers. In 2019, merger and acquisition activity ultimately depended on the state of the global economy.

Technology has a significant impact on the food industry. E-commerce has enabled retailers to spot gaps in the market, can track products that shoppers search for but don’t find, analyze which categories have less competition and find prices that can undercut traditional sources.

The food industry is seeing an increase in consumer customized diets, diversified plant proteins, private labels, direct-to-consumer distribution, blockchain solutions for supply chains, connected food packaging and environmental sustainability. All of these provide both opportunities and challenges to the food and agriculture sector in Canada. By embracing consumer trends through technology, it can increase food prices in Canada by focusing on core health and wellness interests, growing concern for animal welfare and the rising prevalence of restrictive diets.