‘Unsustainable’ food inflation hits low-income Canadians hardest

Inflation might be slowing due to falling gas prices, but it sure doesn’t seem that way when you’re shopping for groceries.

Statistics Canada announced Tuesday that the consumer price index, a broad measure of inflation, rose 7.6 in July compared to a year earlier. That’s a drop from June’s 40-year high of 8.1 percent.

But food inflation continues to rise, reaching 9.9 percent (up from 9.4 percent in June). That, economists, food industry analysts and food bank leaders warn, will hit low- and fixed-income Canadians hardest.

“At 9.9 percent, it’s just unsustainable. Some people will be left behind,” said Sylvain Charlebois, director of the Dalhousie University Agri-Food Analysis Laboratory.

The cost of kitchen staples like bread, eggs, and coffee continued to rise, rising 13.6%, 15.8%, and 13.8% year over year, respectively.

For food banks, rampant food inflation has been a triple whammy, said Caroline Newton, director of communications for Canada’s food banks.

Due to inflation, more people are visiting food banks that have already been running at full throttle during the global COVID-19 pandemic.

“More people are turning to food banks to be able to eat, especially those on fixed incomes like seniors and those on disability benefits,” Newton said, adding that the costs of transporting and storing food have also affected consumers. food banks. And inflation means donations are down, too, Newton added.

“All Canadians, who are very generous, feel the impact of inflation on their budgets and can’t always give as generously as they usually do,” Newton said.

There have been three key drivers of food prices, said Sheila Block, a senior economist at the Canadian Center for Policy Alternatives: climate change, the Russian invasion of Ukraine and ongoing supply chain problems caused by the global pandemic. of COVID-19.

While supply chain issues from the pandemic, including shipping bottlenecks, have started to ease somewhat, environmental change isn’t going to go away, Block said.

“Climate change will continue to have an effect on food prices,” Block said.

The Russian invasion of Ukraine in February also sent grain prices skyrocketing, especially wheat. Ukraine, one of the world’s largest wheat suppliers, complained that Russia was blocking shipments of its wheat. While a late-July deal that unblocked Ukraine’s Black Sea ports helped, there’s no guarantee the deal will continue, Block said.

“Wheat shipments starting to come out of Ukraine could have an impact on food prices, but we really don’t know how long those ports will stay open,” Block said.

Ukraine’s Ministry of Agriculture announced this week that grain exports fell 46 percent this year. The figures fell even after the ports were unblocked: in the first half of August, Ukraine exported 948,000 tons of grain. That is down from 1.88 million tonnes in the same period last year.

Another factor helping to drive up food prices is rising profits for food manufacturers and retailers, argues Jim Stanford, an economist at the Center for Future Work.

“Statistics Canada and the Bank of Canada don’t even mention rising earnings, and that’s part of what’s driving this,” Stanford said. When companies pass on the higher costs, they’re also adding a bit of extra profit for themselves, Stanford said.

The Retail Council of Canada, which represents supermarket chains such as Loblaw, Metro and Sobeys, vehemently denies that its members are profiting.

While profits are up at all three major chains this year, that’s due to an increase in non-food items, which typically have a higher profit margin, RCC spokeswoman Michelle Wasylyshen said.

Big supermarket chains are seeing overall profit margins fairly close to the long-term historical range of 2.5% to 4.5%, Wasylyshen added, pointing to food manufacturers as a bigger culprit.

“This is one of the lowest in any industry and is dwarfed by the profitability level of most food vendors,” Wasylyshen said.

Charlebois agreed that there hasn’t been much speculation from the grocery industry.

“If there is, I haven’t really seen much evidence of it,” Charlebois said. Still, he added, there is no question that some individual food sectors are passing on price increases above their costs.

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