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Record food price inflation demands solutions for a stronger supply chain
Created on 8/31/2022 1:44:57 PM

Written by Michael Graydon, CEO of Food, Health & Consumer Products of Canada
Published on February 18, 2022

With food prices up a whopping 6.5% over January 2021 and food price inflation outpacing general inflation, Canadians are understandably concerned. Price pressures are hitting every stage of the supply chain, and are unlikely to ease up in the near term. It’s critical that farmers, manufacturers, retailers and governments work together to fairly manage the fallout and build stronger, more resilient supply chains for the future.

Experts say food price inflation may top 7% by the end of 2022. Skyrocketing costs to make and distribute essential products are hitting everyone from farmers to food, health, and consumer product manufacturers to consumers, and there’s little relief in sight for this persistent inflation.

Meat, bread, and produce are just some of the household staples for which Canadians are seeing higher prices on grocery store shelves. According to Statistics Canada, bakery prices rose more than 7% in 2021, fresh fruit more than 8%, beef and chicken 9% and 13%. Even pantry essentials like condiments and spices saw prices spike more than 12%.

Beyond immediate impacts on price, supply chain disruptions are also wasting valuable time in products’ shelf life and increasing food waste. Food waste is already a huge problem that costs Canadians $17 billion per year and emits the same greenhouse gas emissions as more than 2 million cars on the road.

Experts have rightly pointed out that “layer upon layer of issues” are behind the prices consumers see in grocery stores. Simon Somogyi, University of Guelph professor and Arrell Chair in the Business of Food noted, “The cost of everything across the food supply chain is getting so expensive and that's the same for farms, wholesalers, packers and processors right up to retailers. All these things are coming together on top of other issues like winter storms and shipping delays and the result is higher prices.”

I have written about this perfect storm of supply chain disruptions extensively. Similar conditions are impacting essential supply chains globally and in our nearest neighbours, for example in the United States where food price inflation is among the contributors to an inflation rate of 7.5%.

The fact is that farmers and manufacturers operating on razor thin margins have few options for absorbing massive hikes in fuel and transportation costs, extreme weather cutting ingredients and packaging supplies, the impacts of the recent damaging blockades at key border crossings, and more.

Canada’s unsustainably high costs of doing business and uncompetitive business environment have long constrained essential manufacturing, and we’re seeing the consequences more clearly than ever now.

Some of the cost aggravators driving inflation are outside anyone’s control, but others can be reined in. For example, government can help address persistent labour shortages, and large grocery retailers can be more understanding of the issues facing manufactures and stop trying to force suppliers to absorb impossible cost increases. I would also suggest that the situation has been worsened by some of the retailers’ unfair fines that have continued even in the face of widespread pandemic supply chain challenges.

As the COVID-19 pandemic shows some signs of easing, recovery must take into account the effects of persistent inflation and take steps to correct the underlying trends we are seeing play out now. The last two years have been an exercise in crisis management, and we must now tackle perhaps an even harder challenge - strengthening essential Canadian manufacturing and supply chains for the long run.

That will require addressing specific symptoms, like consumer price inflation, but also taking steps to treat root causes - like our failure to put food, health, and consumer product manufacturing at the heart of a national manufacturing strategy that would better protect Canada’s self-reliance and promote the economic growth we need to come out of the COVID crisis.