COVID-19 and Food Price Trends

The latest Trends in Retail looks at how COVID-19 has affected food price trends.

‘Despite the fact that COVID-19 is not a food crisis, this pandemic has significant consequences for the food supply chain,’ explains Jeewani Fernando, provincial consumer market analyst with Alberta Agriculture and Forestry. ‘The impact varies across countries and commodity sectors, reflecting factors such as the importance of trade, differences in the functioning of supply chains and the market, which producers and farmers supply. Some of these effects may be relatively short-lived while others may be longer lasting.’

The pandemic caused border and facility closures, shifted consumer demand from foodservice to food retail and created unemployment and underemployment. It also introduced modifications in production, manufacturing, distribution and retailing practices to accommodate enhanced safety procedures, from testing of personnel to additional time for sanitizing. The consequences and uncertainty of the pandemic continue to affect the global economy including Canada.

In the latest Trends in Retail, retail food price trends in Canada are analyzed emphasizing the short-term trend in the pre- and post (first wave) COVID-19 situation to understand the impact and shed some light on food price trends.

‘According to Canada’s Food Price Report, 2019, long-term food prices show an increasing trend representing a normal inflationary pattern,’ says Fernando. ‘However, since the financial crisis of 2008, food prices have become more volatile making it very challenging to predict food prices. The COVID-19 situation has added more challenges to such predictions.’

Overall food prices in Canada have jumped about 2.3% in 2020 compared to 2019. This represents a 2.4% increase in food purchased from stores and a 2.2% increase in food purchased from restaurants.

Retail prices of all major food categories increased significantly with meat, eggs, fresh vegetables and some processed food and ingredients (butter, flour, rice, canned fruits and vegetables) reporting record level price increases.

The Consumer Price Index (CPI) data for Canada report that the price of food purchased from restaurants increased 2.2% in 2020 as compared to 2019. This includes food purchased from full service restaurants reporting about a 2.2% increase and food purchased from fast food/take-out restaurants recording a 2.1% increase.

‘The 2021 year-to-date CPI for restaurant food indicates that prices have increased 2.5%, with food purchased from full service restaurants recording a 2.6% increase and food purchased from fast food and take-out restaurants recording a 2.3% increase. These price trends may indicate that the increasing cost of restaurant operations (complying with COVID-19 safety protocols, increasing food ingredients costs) are being passed on to consumers in early 2021,’ explains Fernando.

While COVID-19 continued to affect Canada’s agri-food chain and global food systems, other notable factors may include the impact of extreme weather events, trade environment, exchange rates, disruptions in food processing, food distribution and retailing, and changes in consumer food purchasing behaviour.

‘Canada’s food price report forecasts that overall food prices in Canada would increase 3% to 5% in 2021. This would be an increase of annual food expenditure per family by $695 compared to 2020, excluding foodservice. The provincial breakdown of the forecast however, predicts a below average food price increase for Alberta,’ says Fernando.