In this week’s EconMinute, we’re talking about food inflation in Canada.
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While headline inflation has fallen, food inflation has not. The latest data show that inflation cooled to 2.8% in June (compared with a year ago) but food inflation remains high at 8.3%.
Issues globally—from droughts to higher costs of key inputs like fertilizer to war—have continuously and sharply pushed food prices higher. Since last spring, prices for many agriculture commodities have come down, but, for a variety of reasons, this has not translated into lower prices at the grocery store.
Now, with Russia pulling out of the Black Sea grain deal (an agreement to allow exports of food and fertilizer to move through three key ports in Ukraine) it seems likely that food prices will continue to soar.
Because this is largely a global market and issue, we were curious to see how food prices have increased for households elsewhere in the world. Is Canada experiencing the same strain on households’ budgets as everyone else?
We limit our analysis to a few countries and regions which we expect might otherwise be similar: the US, UK, and EU. One word of caution with this data: it does not tell us if food prices are higher or lower in one jurisdiction compared to another. What it tells us is simply which locations have experienced the greatest increases in prices over the last few years.
Here is what we found:
- Generally, Canada and the US have seen a similar increase in food prices since 2020 —about 6% per year.
- Nonetheless, food prices in Canada have grown slightly less than those in the US overall: 20% versus 23%.
- The UK and the EU have seen a similar trend over the last few years.
- However, different from North America, food prices in the UK and EU rose slightly less prior to 2022 and then much more steeply thereafter.
- All told, food prices in the UK and EU have risen more than those in North America. They were 29% and 30% higher, respectively, versus 2020—an increase of around 8% per year.
Food price inflation is a global issue with global consequences. Canadian households are feeling the pinch, but things are actually worse still in Europe.
This short analysis begs a number of questions for future research like: what is driving the difference between Europe and North American, how might the impact of the Black Sea grain deal and more recent droughts impact countries and regions differently, and when will changes in commodity prices (should they continue to level off) be reflected at the grocery store? All of these will have important implications on household budgets for Canadians and, ultimately, food insecurity around the world.