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In the face of global inflation, the blame game is no help
Created on 2/23/2023 12:22:45 PM

Written by Michael Graydon, CEO of Food, Health & Consumer Products of Canada
Published on November 1, 2022

With inflation at its highest since 1981 and food inflation even higher, Canadians are eager to find solutions. Doing so requires a straightforward look at the facts, which is not helped by playing any blame games.

Canada’s inflationary environment tracks with skyrocketing costs of goods globally, driven by a complex set of factors in evidence since well before the pandemic. Some factors driving global inflation include COVID-induced demand spikes, labour shortages, crop damage from extreme weather, transportation disruptions, sharp increases in the price of energy and fertilizer as a result of the war in Ukraine, and more.

According to the FAO (Food and Agricultural Organization), global food prices jumped 5.5 per cent from September 2021 to September 2022. Canada’s peer countries face similar trends. For example, the cost of food in the United States was up 13.5 per cent in September 2022 compared to the previous year. Margarine prices are up by 44 per cent in the last year; butter 27 per cent.

Commodity prices are under the same pressure as consumer food prices. The FAO’s food price index shows vegetable oil prices spiked by up to 153 per cent as of March 2022. Drought in the prairies cut Canada’s canola harvest to its lowest levels in 13 years, causing a 35 per cent drop in Canada’s canola oil production.

Increased costs extend well beyond food ingredients. Packaging costs are up 42 per cent for plastic and 36 per cent for paper (compared to January 2020). Freight costs are up 32 per cent. Labour costs have also increased dramatically, and 80 per cent of Food, Health & Consumer Products of Canada (FHCP) members report they are impacted by labour shortages (10 per cent describe the shortages as severe).

The fact is that the cost of producing, selling, and buying food has risen sharply across the board. In a survey this month, FHCP members reported ingredient and input costs have increased on average 23 per cent this year, and costs are expected to continue increasing for at least another six months.

The hard reality is that when costs rise, prices generally rise. University of Calgary professor Trevor Tombe has shown that while food prices continue to rise, retail and manufacturing margins have gone down. For our part, Canadian food leaders are taking steps to mitigate impacts on consumers, for example streamlining expenses by dropping advertising and reducing the variety of products they make. Due in part to these efforts, Canada’s food inflation rate is actually among the lowest in the world.

Everyone in the food supply chain faces similar challenges, and we must all continue to do our part. Government can help. Extremely high costs of doing business, overly burdensome regulations, aging infrastructure, and labour gaps make it more difficult and expensive to make and sell food in Canada, weakening our essential manufacturing and supply chains.

Government can’t end the war in Ukraine or stop extreme weather, but it can and should reduce red tape, address labour shortages, modernize infrastructure, facilitate trade across our borders, and enact the grocery code of conduct supported by agriculture, food suppliers and many grocers (including Sobeys and Metro) that will ensure fairness between farmers, suppliers, and retailers.

Please Note: This op-ed appeared in the November 1st edition of the Toronto Star.