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Shocked by cauliflower prices lately? Get used to it — the cost of that and other fruits and vegetables will likely continue to spike in 2016, experts say.
Food prices, particularly for produce, are expected to increase next year due to a four-year drought in California and a loonie hovering near 11-year lows.
“In general, the message is that Canadian food prices are rising, they’re rising faster than inflation, and this is especially ironic considering that global food prices are falling,” Evan Fraser, a University of Guelph professor specializing in food security, tells Yahoo Canada News. “At a time of low food prices globally, at a time of low inflation globally, Canadian consumers are paying significantly more.”
Even early into a mild winter, some Canadian retailers are already experiencing problems with cost and supply due to the weak dollar and bad growing conditions in the United States.
Earlier this month a Halifax-area Superstore posted a sign reading, “Due to weather related issues in the growing regions coupled with the impact of U.S. exchange we are unfortunately experiencing significantly higher than normal costs and gaps in supply.“ Similar signs were posted this month in Dominion stores in Newfoundland and Labrador.
The price of groceries across the country has climbed 4.1 per cent this year, higher than the inflation rate, according to a forecast of food prices released this month by the University of Guelph. That’s also ahead of the university’s own February 2015 prediction of a 3 per cent increase in 2015.
And the Consumer Price Index for food increased 3.4 per cent from November 2014 to November 2015, according to Statistics Canada. Certain categories saw steeper increases: for example, 6.0 per cent for fresh or frozen meat (excluding chicken), 9.9 per cent for fresh fruit and 10.9 per cent for fresh vegetables.
Some parts of the country experienced even steeper increases in the same period. In Prince Edward Island, the CPI for meat (excluding poultry) increased by 19.9 per cent. The CPI for fresh or frozen poultry soared 17.6 per cent in New Brunswick. Fresh fruit was up 12.5 per cent in Ontario. And the CPI for fresh vegetables jumped by 14.9 per cent in Saskatchewan.
Reasons behind increases
The weak loonie is the most important driver of increased food prices, Fraser says, particularly when it comes to fruits and vegetables. The dollar was just shy of parity with the U.S. greenback in mid-2013 but has lost 17 per cent of its value in 2015 to have its second-worst year on record.
Food imports from the U.S. — particularly important during the winter months of the year — are costlier as a result.
“We import almost all of our fruits and vegetables now, which isn’t something we used to do,” says Fraser, a co-author of the University of Guelph forecast.
Eighty-one per cent of the country’s produce is imported, largely from the U.S.
And the ongoing drought in California, along with uncertain weather conditions in other U.S. regions, is also affecting what consumers are paying here in Canada. California provides a significant chunk of Canada’s fruits and vegetables: 84 per cent of broccoli and cauliflower, 69 per cent of root vegetables, such as carrots and turnip and 68 per cent of lettuce.
The drought is behind the $8 cauliflower, for example, because much of what is available in Canadian grocery stores right now is imported from that state. Both higher production costs for farmers and lower yields are leading to price hikes, which hit doubly hard considering the weakness of the Canadian dollar for buying produce from the States.
While there is some good news in that prices for agricultural commodities — grains and corn — are decreasing, it can take a while for that drop to register at the grocery store, Kevin Grier, an agriculture and food market analyst, tells Yahoo Canada News.
“The reality is that a grocer buys cookies, tomatoes, tomato sauce, from the United States,” Grier says. “That is real, and something they’re going to have to deal with.”
Prices on packaged foods may also increase in 2016, after a couple of years of lower prices due to increased competition, Grier says.
Square footage for groceries increased in Canada from 2011 to 2014 due to the expansion of discount retailers and general merchandisers like Walmart, and the arrival of Target, which meant increased competition for food retailers.
“On the inside of the store where the packaged goods are, really the only way they can compete with each other is on price,” Grier says of food retailers. “In recent years those prices have been declining because of severe competition.”
But competition has slowed down considerably in the last part of 2014 and during 2015.
“That has resulted in modestly higher food inflation,” Grier says. “Probably what we’re going to see is a less competitive environment in 2016, and less opportunities for picking up deals on the inside of the store.”
Food security concerns
Increasing food costs can decrease food security, particularly for communities that are already vulnerable. In Newfoundland and Labrador, for example, 90 per cent of fresh produce is imported, Gioia Montevecchi of Food First NL tells Yahoo Canada News. Montevecchi works with First Nations communities in Labrador to increase the availability of affordable fresh produce in a remote area.
“In rural communities fresh produce is more expensive, and that has a lot to do with the added distribution and transport that food has to go through in order to reach those places,” Montevecchi says.
She co-ordinates a Food First NL program that works with the Nunasuviut government to arrange bulk purchasing of produce for local households in Rigolet, a small community on Labrador’s north coast.
“What we’ve seen is actually nearly all of the households in Rigolet have participated in this program, which speaks to the need for better access to fresh food,” Montevecchi.
The northern parts of the country have dealt with high food costs for years, and could also be particularly hard hit by anticipated rising costs in 2016. Food prices in Nunavut are as much as double those in other parts of Canada, according to March 2015 data released by the territory’s Bureau of Statistics.
However, there are some causes for optimism. While expected El Nino conditions could cause further unpredictability for the growing season in the United States, it might also lead to increased rain that could ease drought, according to Guelph University’s food price report.
And though prices for fruits and vegetables are increasing, those for commodities like sugar and grains are down, Grier says. That should begin to reverse some of the increased prices for meat and poultry, and eventually for packaged foods, he says.
And it’s worth remembering that for most Canadians, even the higher price increases we’re seeing now are manageable, but they’re a significant concern for those who spend a high percentage of their income on food, Fraser says.
“For most Canadians in most parts of the country food is still very affordable,” Fraser says, “and we have to acknowledge that for most Canadians, most of the time, in most regions the system works very well and we only spend about 10 per cent of our income on food.”
But for Canadians who live in remote areas or on reserves, have low incomes or lack convenient access to healthy and fresh food, these price increases are particularly concerning, Fraser says. And when they hit items like fresh fruit and vegetables, they make it harder for people to eat a healthful, varied diet.
“Our food-price report was an attempt to highlight that,” Fraser says. “The issue we’re trying to raise here is that this really hurts the poorer people and the economically marginalized communities.”