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Monday, October 16, 2023

We have not seen food price inflation like this in almost a generation and even then, when food prices rose, year-over-year by 11 % in 1980, 11% in 1982 and 7% in 1983, Canadians were less upset than now because food price inflation was no worse than overall inflation which averaged 10 %, 13 % and 11 per cent in those years. The difference this time is that food inflation has outpaced overall inflation and wages.

LINK https://www150.statcan.gc.ca/n1/en/type/data

SEE CANSIM Table 14-10-0205-01, for wages, Table 18-10-0004-01 for Price Indices and Table 18-10-0245-01 for retail prices

In the 12 months ended July 2023 overall inflation rose 3 per cent, wages by 5 % and food prices by 8 %. There can be considerable volatility in food prices throughout the year and from one year to the next so consider the latest 25 months for which we have comparable data. The most recent run up in food prices began in July 2021. Over that period, overall inflation rose by 11 per cent, wages by 8 % and food prices by 18 %.

Only 18%? Over Thanksgiving we’ve all shared stories of staggering increases in the prices of specific grocery items. Butter in July cost $6.27 per 454-gram block compared to $4.85 The price of in July 2021 was $4.85 for a 29 % increase. The run up in prices for internationally traded commodities such as canola caused margarine prices to increase by 59 per cent to $7.61 per 907-gram tub and those rising prices for cooking oils sent the price of frozen French fries up 28 % to $3.26 per 750-gram bag.  Similarly, the rise in global wheat prices caused pasta prices to rise by 34 % to $3.42 per 500-gram package. The average was ‘only’ 18 % because many food prices rose by much less. The price for whole chickens rose only 9 % over the two years to $6.99 per kilogram, Canned salmon and canned tuna prices rose by 7 % and 4% respectively and the price of a 500-gram package of bacon declined by 3 % to $6.62.

LINK https://www.fcc-fac.ca/en/knowledge/economics/2023-food-beverage-mid-year-report.html

The consensus outlook is for food prices to moderate, in part due to some softening commodity prices (grains, oilseeds), plateauing in labour and energy costs and consumer resistance to higher prices. The latter variable is reflected in reduced profit margins for food manufacturers. In September, Farm Credit Canada (FCC) forecast 2023 margins to decline slightly from 2022 margins.  They were 10 per cent below pre-pandemic (1999) levels in 2020, 2021 and 2022 largely due to rising costs and are forecast to be 11 per cent below 1999 levels this year as consumers refuse to pay more for groceries.

Tomorrow I’ll review our manufacturing sector’s performance in the domestic and international markets.