Canada’s inflation rate tumbled to 2.8 per cent in June, reaching the country’s target range for the first time in more than two years — what Deputy Prime Minister and Finance Minister Chrystia Freeland hailed as “a milestone moment.”
So why are Canadians still feeling the pinch at their local grocery stores?
“(There’s) a combination of very many different things pretty much working collectively to push food prices higher,” Claire Fan, an economist at RBC, told CTVNews.ca in an interview.
“Everybody would love there to be a single demon we could name, but the truth is that there’s a bunch of little factors, there’s a bunch of straws building up on the camel’s back,” said Will Huggins, who teaches finance and business economics at McMaster University in Ontario.
Deputy Prime Minister Chrystia Freeland grocery shopping in Toronto on Monday April 3, 2023. THE CANADIAN PRESS/Frank Gunn
Here’s a look at what’s behind Canada’s high grocery prices and what to expect in the coming months.
With extreme weather events like droughts, wildfires and flooding becoming more frequent in Canada and around the world, as a result of climate change, Fan said farm production and supply chains are impacted, applying some pressure on overall food inflation.
Extreme weather is one of the major threats that RBC has identified for food inflation for the upcoming decade, Fan noted, because it will likely lead to “a lot more volatility and uncertainty.”
“When you have one weather event impacting one type of crop largely, you wouldn’t see persistently high food inflation,” she explained.
“But when you have the scale of these severe weather events happening frequently enough, and especially in the United States, which is our top importer, where we import most of our fruits and veggies from … and we have this happening elsewhere as well, where we import some of our other grocery products, that’s when it really becomes a problem.”
Throughout human history, the weather has “enormously affected” food production and costs, said Huggins, noting that extreme weather events “can complicate things without question” by damaging farm equipment and infrastructure, as well as creating a delay in getting materials or goods to the market, which has a direct cost as well.
However, barring “enormous climatic changes,” the economist said he doesn’t expect climate change to create “continued major pressure” on food prices in Canada and that the country could actually stand to benefit from certain climatological shifts.
“Even though there will be adjustment costs, obviously, our super cold country is about to become a little bit warmer, so it creates opportunities to some extent for us in that regard,” said Huggins.
“We will gain some, we will lose some without question, but compared to many other countries, we’re in a great position when it comes to climate change.”
GEOPOLITICAL TURMOIL
The Russia-Ukraine war is another factor that has led to higher food prices in Canada.
Russia’s invasion of Ukraine in February 2022 resulted in additional upward pressure on global food prices due to the role the two countries play in agricultural and oil production. It led to a surge in prices of wheat, fertilizer and natural gas.
And while the potential impacts of the collapse of the Black Sea grain deal have yet to be seen, Huggins said there could still be reason for concern.
Brokered by the United Nations and Turkiye in July 2022, the deal allowed Ukraine to export grain from its seaports despite the ongoing war. Russia walked out of the deal last month after saying its demands to ease sanctions on its own grain and fertilizer exports had not been met.
Workers load grain at a grain port in Izmail, Ukraine, on April 26, 2023. NATO said Wednesday July 26, 2023, it was stepping up surveillance of the Black Sea region as it condemned Russia’s exit from a landmark deal that allowed Ukrainian grain exports through the Black Sea. (AP Photo/Andrew Kravchenko, File)
The damage to Ukraine’s food growing and processing industry during the war is also going to create “major problems,” he said.
“We usually keep inventory against disruptions, but the fact is that there’s not as much coming into the back end of the warehouse anymore; certain things are actually starting to seriously get disrupted,” he said.
“The collapse of the Black Sea grain deal has the potential to create a lot of problems. The grain deal worked a little bit for a while, but we’re going to start feeling the pain that we anticipated last year.”
Fortunately, North America is “largely insulated” from these problems because it does have a lot of domestic food production, Huggins noted.
“So as much as it hurts us, we have to remember that we don’t have to make questions about feeding which kid,” he added.
A family harvesting their wheat crop near Cremona, Alta., Tuesday, Sept. 6, 2022. THE CANADIAN PRESS/Jeff McIntosh
The bottleneck for machinery used on farms is one example that has driven up prices in Canada, said Huggins, adding there is a “backlog of orders for farm machinery in Canada stretching into next year.”
“The machinery backlog is working its way out; we don’t have as many supply side problems in terms of COVID compared to say, a year or two years ago,” he said.
“So we are still experiencing some of this sort of COVID hangover in the agricultural sector.”
Huggins said farmers moving into retirement and a lack of Canadians wanting to work in the agricultural sector are going to lead to a supply issue of physical workers.
Therefore, Canada may have to invest in more machinery, which will require fewer people to do the physical labour on farms, or employ more people to work in the sector.
“The idea is to be clear eyed about what our supply side problems are in food over the next few years and to try to get ahead of it,” said Huggins.
BIG GROCERS DICTATING FOOD PRICES
Many Canadians have pointed the finger at big corporations for how expensive groceries have become over the past few years, but Huggins said the issue of high food prices is a bit more complex.
In Canada, five retailers — Loblaw, Sobeys, Metro, Walmart and Costco — control an estimated 80 per cent of the grocery market share, according to a 2021 study from the federal government.
As Huggins pointed out, these companies make up an oligopoly, which is a market dominated by a small group of suppliers, so they are able to exercise their power in the market and have “very protected profit margins.”
However, he said there hasn’t been much evidence of them abusing their power in the market to drive up food prices in the last two years.
“In the early days of the pandemic, there was some jockeying for price increases, mostly because there were big supply disruptions happening, but we haven’t seen an enormous amount of it,” he added.
“They’ve certainly been able to prevent their profits from coming down, but I haven’t seen a lot of exploitative size numbers.”
WHEN WILL FOOD PRICES GO DOWN?
Canada’s Food Price Report 2023 from the Agri-Food Analytics Lab at Dalhousie University said consumers can still expect a five to seven per cent food price increase in 2023, with the most substantial increases in vegetables, dairy and meat. The report predicts that an average family of four will spend up to $1,065 more on food compared to 2022.
Although they don’t expect food prices to decrease dramatically overnight, Fan and Huggins said they expect food inflation to slow in the coming months.
“For food inflation to ease persistently, you kind of need all these things to reverse course and work in the other direction collectively. And we have seen most of them coming down, but it really is the fact that it takes a lot,” said Fan.
“It takes all these things to start to normalize — the supply chain, which it did since late 2021, wage growth in Canada is still kind of elevated at the moment, … the impact on commodity prices from the Russian invasion to Ukraine.”
People shop for produce at the Granville Island Market in Vancouver, on Wednesday, July 20, 2022. THE CANADIAN PRESS/Darryl Dyck
Huggins shared a similar remark.
“My best assessment is that things will get a little bit better than they are based off of conditions that they are at the moment and so they’ll slow down, which will be nice, quite frankly, because there’s a lot of people who are remarkably angry about prices that have sort of risen in the last few months,” he said.
“The sticker shock has been quite painful for people, to see food prices up like 20 per cent in two years.”
OTTAWA – The New Democrats confirmed Thursday they won’t help Pierre Poilievre’s Conservatives topple the government next week, and intend to join the Bloc Québécois in blocking the Tories’ non-confidence motion.
The planned votes from the Bloc and the New Democrats eliminate the possibility of a snap election, buying the Liberals more time to govern after a raucous start to the fall sitting of Parliament.
Poilievre issued a challenge to NDP Leader Jagmeet Singh earlier this week when he announced he will put forward a motion that simply states that the House has no confidence in the government or the prime minister.
If it were to pass, it would likely mean Canadians would be heading to the polls, but Singh said Thursday he’s not going to let Poilievre tell him what to do.
Voting against the Conservative motion doesn’t mean the NDP support the Liberals, said Singh, who pulled out of his political pact with Prime Minister Justin Trudeau a few weeks ago.
“I stand by my words, Trudeau has let you down,” Singh said in the foyer outside of the House of Commons Thursday.
“Trudeau has let you down and does not deserve another chance.”
Canadians will have to make that choice at the ballot box, Singh said, but he will make a decision about whether to help trigger that election on a vote-by-vote basis in the House.
The Conservatives mocked the NDP during Question Period for saying they had “ripped up” the deal to support the Liberals, despite plans to vote to keep them in power.
Poilievre accused Singh of pretending to pull out of the deal to sway voters in a federal byelection in Winnipeg, where the NDP was defending its long-held seat against the Conservatives.
“Once the votes were counted, he betrayed them again. He’s a fake, a phoney and fraud. How can anyone ever believe what the sellout NDP leader says in the future?” Poilievre said during Question Period Thursday afternoon.
At some point after those comments, Singh stepped out from behind his desk in the House and a two-minute shouting match ensued between the two leaders and their MPs before the Speaker intervened.
Outside the House, Poilievre said he plans to put forward another non-confidence motion at the next opportunity.
“We want a carbon-tax election as soon as possible, so that we can axe Trudeau’s tax before he quadruples it to 61 cents a litre,” he said.
Liberal House leader Karina Gould says there is much work the government still needs to do, and that Singh has realized the consequences of potentially bringing down the government. She refused to take questions about whether her government will negotiate with opposition parties to ensure their support in future confidence motions.
Bloc Québécois Leader Yves-François Blanchet hasn’t ruled out voting no-confidence in the government the next time a motion is tabled.
“I never support Liberals. Help me God, I go against the Conservatives on a vote that is only about Pierre Poilievre and his huge ambition for himself,” Blanchet said Thursday.
“I support the interests of Quebecers, if those interests are also good for Canadians.”
A Bloc bill to increase pension cheques for seniors aged 65 to 74 is now at “the very centre of the survival of this government,” he said.
The Bloc needs a recommendation from a government minister to OK the cost and get the bill through the House.
The Bloc also wants to see more protections for supply management in the food sector in Canada and Quebec.
If the Liberals can’t deliver on those two things, they will fall, Blanchet said.
“This is what we call power,” he said.
Treasury Board President Anita Anand wouldn’t say whether the government would be willing to swallow the financial implications of the Bloc’s demands.
“We are focused at Treasury Board on ensuring prudent fiscal management,” she said Thursday.
“And at this time, our immediate focus is implementing the measures in budget 2024 that were announced earlier this year.”
This report by The Canadian Press was first published Sept. 19, 2024.
OTTAWA – Treasury Board President Anita Anand has been sworn in as federal transport minister at a ceremony at Rideau Hall, taking over a portfolio left vacant after Pablo Rodriguez resigned from cabinet and the Liberal caucus on Thursday.
Anand thanked Rodriguez for his contributions to the government and the country, saying she’s grateful for his guidance and friendship.
She sidestepped a question about the message it sends to have him leave the federal Liberal fold.
“That is a decision that he made independently, and I wish him well,” she said.
Prime Minister Justin Trudeau was not present for the swearing-in ceremony, nor were any other members of the Liberal government.
The shakeup in cabinet comes just days after the Liberals lost a key seat in a Montreal byelection to the Bloc Québécois and amid renewed calls for Prime Minister Justin Trudeau to step down and make way for a new leader.
Anand said she is not actively seeking leadership of the party, saying she is focused on her roles as minister and as MP.
“My view is that we are a team, and we are a team that has to keep delivering for our country,” she said.
The minority Liberal government is in a more challenging position in the House of Commons after the NDP ended a supply-and-confidence deal that provided parliamentary stability for more than two years.
Non-confidence votes are guaranteed to come from the Opposition Conservatives, who are eager to bring the government down.
On Thursday morning, Rodriguez made a symbolic walk over the Alexandra Bridge from Parliament Hill to Gatineau, Que., where he formally announced his plans to run for the Quebec Liberal party leadership.
He said he will now sit as an Independent member of Parliament, which will allow him to focus on his own priorities.
“I was defending the priorities of the government, and I did it in a very loyal way,” he said.
“It’s normal and it’s what I had to do. But now it’s more about my vision, the vision of the team that I’m building.”
Rodriguez said he will stay on as an MP until the Quebec Liberal leadership campaign officially launches in January.
He said that will “avoid a costly byelection a few weeks, or months, before a general election.”
The next federal election must be held by October 2025.
Conservative Leader Pierre Poilievre said he will try to topple the government sooner than that, beginning with a non-confidence motion that is set to be debated Sept. 24 and voted on Sept. 25.
Poilievre has called on the NDP and the Bloc Québécois to support him, but both Jagmeet Singh and Yves-François Blanchet have said they will not support the Conservatives.
Rodriguez said he doesn’t want a federal election right away and will vote against the non-confidence motion.
As for how he would vote on other matters before the House of Commons, “it would depend on the votes.”
Public Services and Procurement Minister Jean-Yves Duclos will become the government’s new Quebec lieutenant, a non-cabinet role Rodriguez held since 2019.
This report by The Canadian Press was first published Sept. 19, 2024.
— With files from Nojoud Al Mallees and Dylan Robertson
