Report predicts 2020 food price increase

Report predicts 2020 food price increase
Dec 06, 2019

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Climate change and global market factors will increase food prices in all categories – particularly meat products – in 2020, the Canadian Food Prices Report predicts 

By Jackie Clark
Staff Writer

Canadian food prices will increase an average of 2 to 4 per cent for Canadians in 2020, the Canadian Food Prices Report 2020, put together by Dalhousie University and University of Guelph researchers, predicts.

The increase will vary depending on food type but, generally, this report is good news for farmers, said Dr. Sylvain Charlebois, a professor in the Rowe School of Business at Dalhousie and lead author on the report.

“You want food inflation to occur, but there is a point where you are going to be leaving Canadians behind and 2020 may actually be a year like that, because we are expecting a higher-than-average food (price) inflation rate,” he said to On the other hand, increasing food prices may help Canadian farmers, particularly producers in the beef and pork sectors.

“Next year, if you’re in livestock, we are expecting a good year overall – especially for cattle and hog producers,” Charlebois said. “The demand for these products is quite robust globally.”

Indeed, meat prices are predicted to increase by 4 to 6 per cent. This increase can be attributed in part to the African swine fever crisis in China, which has led the country to import more meat from other countries. China has also re-opened its border to Canadian red meat.

“These are signs that China is really desperate for protein,” Charlebois said. The lack of supply contributes to increasing prices.

Climate change is also a factor in food prices because variable weather increases the cost of production.

“Climate change is making prices more volatile than ever before, so it’s harder for grocers and processors to manage. You don’t want to spook consumers but, at the same time, you want to make some money,” Charlebois said.

“Farmers aren’t necessarily involved in that process because they’re price-takers. But the rest of the value chain is trying to strike that balance every single day,” he added.

The relationship between food prices at the retail level and production and profitability on farm is complex.

“Forecasting food prices is not easy but, based on what we see so far in our crystal machine-learning ball, we do see 2020 as a good year for farmers in general. I would say that 2020 is looking a lot like 2014,” Charlebois explained.

Experts have identified similarities between the two years, but hope that grocers have learned lessons from 2014. That year, beef prices rose so dramatically that consumers were spooked and started to look for alternative options. 

“Greed will actually lead to market share losses,” Charlebois said.

And grocers can do more to connect consumers with the food supply chain, he thinks.

 “I don’t think consumers actually think about farmers as prices fluctuate,” he said. Consumers “tend to forget that it’s a low-margin industry from farm gate to plate.”

“That interface between grocers and consumers could allow the public to better understand or better sympathize with farmers,” he explained.

In Australia, supply management no longer exists for dairy and droughts have increased the cost of production to buy supplemental feed. But retailers mostly sell milk for AU$1 (C$0.91) per litre.

“That really undermines the value of milk in the consumer’s eye but, because of these droughts, a lot of farmers are really struggling financially,” Charlebois said.

Store owners have put up signs indicating that 30 per cent of the cost of milk would go into a fund to support producers through the drought.

“I thought that was really interesting because it really entices consumers to think about the supply chain and about farmers. I don’t think it’s going to happen in Canada anytime soon, but I would certainly encourage the supply chain and grocers to think about that,” he said.

VLG\iStock\Getty Images Plus photo

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