SYLVAIN CHARLEBOIS: Seeing the light at the end of the food inflation tunnel

As soon as once more, the numbers popping out of Statistics Canada had been discouraging.

The meals inflation fee within the nation was 8.8 per cent in June, which is greater than the overall inflation fee.

Everyone seems to be affected by greater meals costs. People discovered final week that meals inflation on the grocery retailer was 12.4 per cent, a 41-year excessive.

Regardless of this, customers can see some gentle on the finish of the lengthy tunnel we’ve all been passing by way of not too long ago.

First, we consider meals inflation in Canada could have peaked. Provide chain challenges are nonetheless there, making the motion of products costlier, however issues are slowly bettering.

Pandemic protocols across the globe are more and more changing into predictable, making for simpler logistical planning. In February, the Russian invasion of Ukraine pushed commodity costs greater, making enter prices a difficulty for farmers and meals producers, however this appears to have stabilized, as properly.

If nature continues to co-operate, Canada’s agricultural sector ought to see a robust harvest this yr, serving to to maintain commodity costs decrease and prices down.

Since March, meals gross sales at greenback shops have elevated by 18 per cent, in line with NielsenIQ. Gross sales at low cost shops have elevated by 5 per cent in that interval, so customers are clearly buying and selling down and grocers comprehend it.

Extra low cost retailer conversions are on the way in which. We have now seen at the very least 15 new main low cost shops within the nation thus far this yr. Relying on the week, customers can save wherever between 25 and 40 per cent at a reduction retailer, in comparison with a daily grocery outlet.

However the Canadian Dairy Fee performed occasion pooper by recommending an unprecedented second enhance of two.5 per cent for Sept. 1, simply as colleges set to open. This comes after a file 8.4 per cent hike in February.

In consequence, the worth of butter is up nearly 20 per cent since December. In some markets, fluid milk is 25 per cent costlier than final winter.

The two.5 per cent on the farm will look extra like 6-10 per cent at retail. As costs stabilize in most sections of the grocery retailer, dairy would be the exception for some time.

So as to add insult to harm, we additionally discovered final week that executives on the Canadian Dairy Fee acquired bonuses final yr.

These are federal workers. The Crown company refused to reveal quantities or causes bonuses got.

There’s nothing flawed with bonuses, however the lack of transparency is unacceptable. Taxpayers and customers deserve higher. Our quota system was designed to make our dairy sector resistant to inflationary cycles. One thing just isn’t working.

Rates of interest are additionally going up. Final week, the Financial institution of Canada made an nearly unprecedented transfer, delivering a jolt to customers in every single place, by elevating its benchmark rate of interest a full share level. That is the most important one-time enhance since August 1998.

Because the announcement, mortgage brokers have been busy. For a lot of households, the price of shelter spiked, making it more durable to spend on anything, however meals is a necessity.

Earlier than the speed hikes, the market was flooded with money, and a few customers had no qualms about paying $28 for a T-bone steak. This clearly contributed to greater costs, particularly for premium merchandise and classes.

Since fewer individuals can now afford a $28 steak, we expect some costs to melt and even drop. Easy meals economics.

With greater charges, although, our Canadian greenback will acquire energy towards the American buck, making imports cheaper, and we do import many meals merchandise. That is doubtless going to assist customers who buy centre-of-the-store dry items, whose costs have skyrocketed.

However the U.S. Federal Reserve can also be planning one other fee enhance, which might put strain on our greenback.

Attention-grabbing instances. Greater charges are unhealthy information for mortgage house owners however excellent news for imports.

General, we should always not anticipate costs to drop anytime quickly, however the fee at which meals costs are rising is slowing. Inflation is vital for our meals financial system, however a ten per cent fee is simply not sustainable.

As predicted in December by Canada’s Meals Worth Report 2022, we should always finish the yr at about seven per cent, until another geopolitical disaster happens. That is nonetheless excessive, however it’s not 10 per cent.

Sylvain Charlebois is professor in meals distribution and coverage, and senior director of the AgriFood Analytics Lab at Dalhousie College.