“It is probable that Canadians will continue to experience the strain of food inflation compounded by increasing costs of housing, energy and various other expenditures,” according to Canada’s Food Price Report 2024.

The food bill for a family of four is estimated at $16,297.20, an increase of $701.79 compared to 2023.

The report is produced by Dalhousie University, the University of Guelph, the University of British Columbia and the University of Saskatchewan.

Sylvain Charlebois, project lead, professor, and director of the Agri-Food Analytics Lab at Dalhousie University, said this reflects two major disruptions — the global pandemic and the war in Ukraine — having been largely absorbed by global food markets.

“These ‘black swan’ events have kind of faded away,” Charlebois said.

Grocers are responding to the return of some stability by running promotions and generally engaging in stiffer competition.

“It is much easier for them to plan, and plan promotions,” Charlebois said.

Last year’s report forecast a five to seven per cent increase in food prices in 2023. The current rate for food price increases is 5.9 per cent, according to Consumer Price Index data.

The increase was attributed to enduring COVID-19 supply chain problems, climate change, carbon taxes, the conflict in Ukraine and labour disruptions.

Charlebois expects food inflation to continue to fade throughout 2024. “The sweet spot for food inflation is 1.5 to 2.5 per cent,” he said. “We’re not there yet, but I think we will be there by the end of 2024.”

Still, Canadian consumers have been hard-pressed in recent months when it comes to food prices. There were nearly two million visits to food banks in Canada in 2023, a 32 per cent increase over the previous year.

“This is the highest level of food bank use in Canada on record,” stated the report.

Consumers believe that price gouging by grocery companies is the main reason for escalating food prices, but a Bank of Canada study shows markups were in line with inflation rates.

Charlebois expects to see the political heat surrounding food inflation to fall in lockstep with the slower growth in food prices. He also noted that consumer fury around food prices was largely a reaction to another runaway piece of the Canadian consumer economy — the cost of shelter. As that’s risen rapidly, consumers are frequently forced to make hard decisions in other areas of their domestic economy — such as food choices, as it’s easier to make changes to food purchases than it is to find suitable affordable

“We’ve had a massive trading down in food choices in Canada over the past year — mostly from February to October,” Charlebois said. “That is stabilizing now.”

Charlebois added that the recent Bank of Canada decision to hold pat on interest rates will also contribute to consumer relief both on food prices and shelter costs. He noted that global warming and the desire to decarbonize food supply chains remain inflation risks in the food sector.

Concentration

The report noted that 80 percent of Canada’s grocery market is controlled by five companies: Loblaws (29 per cent market share), Sobeys/Safeway (21 per cent), Costco (11 per cent), Metro (10.8 per cent), and Walmart (7.5 per cent).

“Canada has a concentrated grocery industry and is a tough landscape for new players to break into,” stated the report.

One thing that should help is the “imminent introduction” of a consumer protection code of conduct in Canada’s food sector.

“(It) is a momentous development with promising implications for consumers and the industry,” stated the report.

Australia, the United Kingdom and Ireland have already adopted codes and those countries have shown more modest increases in food prices when adjusted for inflation. However the voluntary code has run into newfound opposition from grocers as it nears the finish line. Loblaws is suggesting it could raise grocery prices by more than $1 billion, and Walmart Canada has said it could add unnecessary burdens to producers.

That’s led to a code of conduct push from two high-profile Canadian political leaders.

Lawrence MacAuley, federal minister of agriculture and agri-food and Andre Lamontagne, Quebec’s minister of agriculture, fisheries and food, have issued a joint statement.

“After years of work, broad consultations, and unprecedented engagement across the grocery supply chain, we’re disappointed to see that the Grocery Sector Code of Conduct has still not been launched and that supply chain partners are hesitant to move forward,” the statement reads.

The Canadian government has also introduced Bill C-56, which proposes amendments to the Competition Act to enhance competition in the grocery sector.

—Gord Gilmour is senior editor, news and national affairs with Glacier Farmmedia. He write from Winnipeg.  Additional reporting from Sean Pratt.

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The increase will be 1.77 per cent, or about 1.5 cents per litre for milk going into processing plants, the Canadian Dairy Commission said Wednesday.

The commission had already published this increase in October, but said Wednesday that “exceptional circumstances” led to the decision to postpone its implementation.

The milk pricing formula includes 50 per cent of the year-over-year change in cost of production and 50 per cent of the change in the Consumer Price Index, or overall inflation.

After the commission published its proposal for the national pricing formula last month, however, the Canadian Federation of Independent Grocers (CFIG) invoked an “exceptional circumstances” process that leads to an additional round of consultations between the CDC and other stakeholder organizations.

Those stakeholder groups include the Consumer Association of Canada, Dairy Farmers of Canada (DFC), Dairy Processors Association of Canada, Restaurants Canada and the Retail Council of Canada, along with the CFIG.

During consultations, DFC said it recommended the delay because of ongoing food inflation.

Grocery stores have been under pressure from consumers and the federal government to stabilize prices, although some observers say most of the price increases are due to multiple factors within the supply chain.

Price changes for consumer products will vary on those factors.

Officials noted Wednesday the 1.77 per cent increase is well below the current overall inflation rate of 4.4 per cent.

— Karen Briere reports for the Regina bureau of the Western Producer.

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The Canadian Dairy Commission — the Crown corporation managing Canada’s milk supply — on Oct. 6 published the results of its Cost of Production survey, as a precursor to setting the annual milk price adjustment due to take effect Feb. 1, 2024.

The commission pegged the 2023 indexed Cost of Production (iCOP) at $93.09 per standard hectolitre, down 1.43 per cent from $94.44 in 2022, but marked the consumer price index (CPI) at 155.4, up 4.98 per cent from the 2022 level of 148.

The commission’s national pricing formula (NPF) is based on 50 per cent of the annual change in iCOP and 50 per cent of the change in the CPI, which in this case would result in an increase of 1.7736 per cent effective Feb. 1, 2024 — although the commission said that figure “is not necessarily equivalent to the next price adjustment.”

READ MORE: Farm-gate milk price increase predictable, says economist

The commission had given stakeholder groups until Friday (Oct. 13) to declare if they wish to invoke the “exceptional circumstances” process — which in turn triggers an additional discussion period with those groups but won’t necessarily lead to a change in the price adjustment.

The participating stakeholder groups include Dairy Farmers of Canada (DFC) as well as the Canadian Federation of Independent Grocers (CFIG), Dairy Processors of Canada, Retail Council of Canada, Restaurants Canada and Consumer Association of Canada.

With two out of three criteria met for invoking the exceptional circumstances mechanism — namely, an “unexpected event” in the view of the stakeholder making the request, and a spread of more than five percentage points between the change in iCOP and CPI — the CFIG has requested the process, the commission said in a statement Friday.

If the exceptional circumstances process hadn’t been triggered, the NPF result would have applied, and the commission would have moved on to hold consultations on the support price for butter.

Now, however, the commission said Friday its NPF result is suspended and the board will hold pricing consultations with stakeholder groups between Tuesday and next Monday (Oct. 23).

But the commission said it will still make a final milk pricing announcement by no later than Nov. 1, to take effect next Feb. 1.

‘In solidarity’

And while the NPF calculations may support a farmgate milk price adjustment of 1.77 per cent, DFC said in a separate statement Friday it will “recommend that this adjustment be delayed.”

“Dairy farmers and their families are also consumers and experience the high cost of food these days,” DFC president David Wiens said. “Recognizing the current level of food inflation and in solidarity with all Canadians, we have recommended the Canadian Dairy Commission delay its application of the price adjustment on milk until further notice.”

However, he added, the retail prices consumers pay for dairy are “ultimately determined by other players in the supply chain. Our hope is that our decision will result in other actors maintaining the price of dairy products at a time when food inflation hovers around nine per cent.”

The commission, in setting the 2023 iCOP, noted dairy farmers saw increases in most indexed key costs, including interest rates.

However, the commission added, those increases were offset by decreases in other costs, such as purchased feed; fuel and oil; and fertilizers and herbicides.

At the close of the cost indexation period in August, the commission said, “several indices seem to stabilize,” such as land and building repairs, and machinery and equipment repairs. — Glacier FarmMedia Network

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The reweighting, which Statistics Canada carries out every year, has historically had only a marginal impact on the headline number. The new basket weights will be applied to May’s inflation data, due out on June 27.

The rebalancing reflects changes in 2022 compared to 2021. StatCan said the alterations were designed to take into account the continuing recovery from the impact of COVID-19.

“Spending that began to gradually shift back towards pre-pandemic patterns in 2021 continued and were more pronounced in 2022, with several sectors inching closer to pre-pandemic basket weight shares,” it said.

COVID-related measures and disruptions to supply chains helped push Canadian inflation up to a near-40 year high of 8.1 per cent in June last year. It has now dropped to 4.4 per cent, still more than double the Bank of Canada’s two per cent target.

Gasoline prices, pushed higher by increased demand as well as Russia’s invasion of Ukraine, will now account for 4.27 per cent of overall inflation, up from 3.47 per cent.

Gasoline is part of the larger transportation component which, for the second consecutive year, increased the most among the major eight segments, rising to 16.94 per cent from 16.16.

The food component expanded to 16.13 per cent from 15.75 per cent, reflecting increases in sales at restaurants as lockdown measures were removed.

But the shelter component dropped to 28.22 per cent from 29.67 per cent, in part due to lower costs for rent and other accommodation expenses as the housing market cooled.

DVD players were removed from the 2023 basket as they have become less popular with consumers following the advent of streaming services. Conversely, charcoal barbecues and snow removal equipment were added.

— David Ljunggren is a Reuters political correspondent in Ottawa.

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There are a few pockets in Alberta and Saskatchewan that are struggling with dryer conditions. This has brought on some yearlings sooner than anticipated but calf numbers are very thin. Feedlot margins are hovering around breakeven and we’ve seen equity buildup over the past month. Looking forward, the April live cattle futures experienced a contract high close on Friday which has bolstered demand for 850 pound plus feeders.

In Central Alberta, mixed steers averaging 900 pounds traded from $196 to as high as $201; mixed heifers averaging 875 to 900 pounds were quoted from $180 to $183 in the same region. A small group of medium to larger frame tan steers weighing 825 pounds were quoted at $210 landed in Southern Alberta; red heifers weighing 800 pounds were reported at $189 in the same region. In southcentral Saskatchewan, angus-based mixed steers weighing 675 pounds were valued at $222 while similar quality heifers weighing 606 pounds were quoted at $215.

A grain industry led crop tour estimated barley yields at 71.1 bushels per acre compared to 69.4 bushels per acre last year. Canadian barley production is now estimated at 9.1 million mt, compared to the 2017 output of 7.9 million mt. Cattle producers are expecting Fridays’ USDA WASDE report to show a downward revision in fourth quarter beef production. These two factors are contributing the strength in the nearby feeder market.

Canadian feeder cattle exports to the U.S. for the week ending July 21 were 138,092 head, up from 83,009 head for the same time last year. Strong demand from south of the border will continue to support Western Canadian feeder prices, especially for yearlings.

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Major markets in Alberta led the charge higher as 900 pound steers flirted above the magical $200 level. Order buyers were receiving a fair amount of calls this week. The stronger market has aroused the buying interest and drawn a larger crowd. Feedlot operators feel like they missed an opportunity because prices are slightly higher each week. Therefore, this psychology has built market momentum for the time being. Ranchers are starting to sell yearlings in the dryer pockets of Saskatchewan while late blooming backgrounded cattle are also coming on stream in Alberta.

In Central Alberta, larger frame tan mixed steers weighing 870 pounds sold for $206 while mixed steers averaging 830 pounds traded for $210. A larger group of heifers weighing 920 pounds sold for $184 in Southwestern Saskatchewan; in Central Alberta, medium-frame red mixed heifers averaging just over 860 pounds sold for $187.

In Southern Alberta, larger frame Simmental mixed steers with very thin butter weighing just over 900 pounds were quoted at $202. The calf market was hard to define due to lack of volume; however, steers weighing around 650 pounds were trading from $223 to as high as $230. Given the hot yearling market, these lighter weight feeders look like steal.

The U.S. economy is operating near full capacity. One can’t underestimate the power of tax cuts especially when it comes to the beef market. It appears that beef demand is experiencing a year-over-year increase of 3 per cent to 4 per cent which is helping to absorb the increase in production. U.S. feeder markets also traded US$2 to US$4 above week ago levels. In Nebraska, 900 pounds steers sold for an equivalent price of Cdn$200.

Given the lower supplies in Western Canada, Alberta markets need to trade at a premium to U.S. values in an effort to curb exports.

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Feeder cattle prices tend to make a seasonal high in late July and this year is no exception. Market reports in Alberta had higher quality 900-lb. steers trading just under the psychological $200 level. Yearling prices jumped $7 to as much as $10 last week, recouping all slippage from earlier in July. There appears to be an optimistic outlook for fourth-quarter fed cattle prices, which has enhanced buying enthusiasm for shorter-keep replacements. February live cattle futures are within a stone’s throw of contract highs and the upward trend remains intact. Despite drier conditions in some pockets of Western Canada, above-average yields are expected for Canadian barley and U.S. corn crops.

Most auction barns remain in summer holiday mode and there are limited supplies coming on the market. In central Alberta, a small group of mixed steers weighing just over 900 lbs. sold for $198. Small groups of steers averaging around 850 lbs. were selling in the range of $202-$207 in the same region.

The calf market was hard to define, given the smaller numbers available. Buyers shied away from the lighter weight categories with extensive heat plaguing the Prairies. Small groups of steers weighing 500-600 lbs. in southern Manitoba were quoted from $210-$222. Angus-based steers averaging 600 lbs. were quoted at $223 landed in southern Alberta while mixed red heifers averaging around 650 lbs. were quoted at $196 in the same area.

The Canadian consumer price index experienced a year-over-year increase of 2.5 per cent during June, which was above expectations. Stronger inflation may lend credence to another interest rate hike from the Bank of Canada in September. Look for a stronger Canadian dollar over the next couple weeks, which will overhang Canadian fed and feeder cattle markets.

— Jerry Klassen manages the Canadian office of Swiss-based grain trader GAP SA Grains and Produits Ltd. and is president and founder of Resilient Capital, specializing in proprietary commodity futures trading and market analysis. Jerry consults with feedlots on risk management and writes a weekly cattle market commentary. He can be reached at 204-504-8339.

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Expected price declines for other foods, however, will limit the impact on the total grocery bill in the country.

In the mid-year update for Canada’s Food Price Report, researchers at Dalhousie in Halifax forecast meat prices will increase by up to nine per cent on the year, which compares to the December 2016 forecast of a four to six per cent increase for meat.

Overall, food inflation is forecast at three to four per cent by the study, which would mark a slight decline from the three to five per cent increase expected in the earlier report.

The fish, dairy, bakery products and vegetable sectors were all revised lower from the annual report. However, on an individual crop basis, lettuce was singled out as a product seeing price spikes.

The rise in lettuce was reportedly tied to a combination of high demand and weather concerns with California’s crop.

The Dalhousie report compares with the official Statistics Canada Consumer Price Index, which indicates a much more modest rate of food inflation.

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