Canada’s Food Price Report 2024: Food Prices Set to Rise

Food is about to get more expensive. The latest in Canada’s Food Price Report states that overall food prices will increase by 2.5% to 4.5%. That translates to a family of four spending $701.79 more than the previous year—for the same quantity of food.

Happily, the report also predicts a price decrease on essential items. Inflation continues to subside from post-COVID highs, and that will likely bring some relief to Canadians. Still, there are plenty of concerns about food affordability.

Let’s dive into the report data highlights so you can prepare your grocery budget for the upcoming year.

Price Hikes and Inflation

First up, several categories of food saw an increase due to inflation. Bakery goods saw the highest increase, up 8% from September 2022 to September 2023. In second came vegetables, at 7.6% from the Consumer Price Index. Both categories saw forecasted price hikes between 5-7%. Inflation did affect meat (4.4%) and dairy (4.0%) but at rates less than forecasted (which bodes well overall inflation patterns).

On a provincial level, provinces saw different levels of price changes. Saskatchewan (5.0%), Alberta (5.5%), and Ontario (5.5% increase) showed as the best performers, as all provinces saw prices rise between 5-7%. Despite a downward trend in inflation, these price increases are still substantial. Canadians will feel the difference in product prices and the monthly bill of groceries.

What drove inflation and price hikes? Canada’s Food Price Report offers several viable reasons:

• Climate factors that hurt harvests.
• Changes in input costs.
• Geopolitical events such as the Ukraine invasion and Middle East conflicts.
• Labour unrest affecting supply chains.

The good news? Price increases should be lower next year. Some categories such as dairy and fruit are only forecasted to increase in price between 1-3% in 2024.

Canadians are Spending Less Money

Even with the higher food prices, Canadians are buying less food. Retail sales declined, with an average $261.24 monthly spend per capita in August 2022 dropping to $252.89 per capita in August 2023. And, the annual expenses on food for a family of four came almost seven hundred dollars below estimates. Canadians are not spending nearly as much on food in store as they did years prior.

Changes in shopping habits appear to explain why. Canadians did not buy the same quantities, a direct way to meet weekly budgets and save money. In addition, Canadians also reduced the quality of food selections. With the high cost of living and more personal debt, Canadians have turned to less expensive alternatives.

Corporate Profiteering

Reports that corporate profits drove inflation sparked great interest in Canadians. It led to media attention and official studies by competition bureaus and official committees. As a result, Dalhousie University reports that 30.3% of Canadians think grocery chain price gouging is the main reason food prices have risen in Canada.

All this comes on the heels of Canada Bread Company pleading guilty to four counts of price fixing under the Competition Act. Consumer trust is low. And that fact is amplified by the limited competition within the sector. 80% of the grocery market is controlled by five companies: Loblaws (29% market share), Sobeys/Safeway (21%), Costco (11%), Metro (10.8%), and Walmart (7.5%). Uniform price increases have the optics of profiteering.

Still, Canada’s Food Price Report noted that food inflation is a worldwide issue. And Canada had the third lowest food inflation rate at 9.1% as of June 2023. The Bank of Canada also did a study and found that markups were zero or negative. Price increases are strictly in line with inflation.

So what options are there? Some want government intervention. Others cite price freezes, at least for some food staples. 44.2% of respondents expected more transparency related to food sales. More aggressive options involve windfall taxes or government-run grocery chains.

Forecasts for 2025

To further assist Canadians, the Canadian Food Price Report uses analytics to predict future changes. Several clear trends will likely depict 2024 and food price changes heading into 2025:

• Grocery competition in Canada due to Bill C-56: The Federal government amended the Competition Act. Many of the changes are to support greater competition in the grocery sector. Case in point, the Competition Tribunal can now strike down agreements that operate in an anti-competitive spirit. Similar efforts helped manage cell phone plans and could work for grocery prices.
• Geopolitical impacts: Last year showed how world conflicts can affect commodities. Wheat, sunflower oil, and fertiliser prices all increased due to the Ukraine invasion. Similar effects could be seen this year and the next as conflicts in the Middle East continue.
• Federal carbon tax: Transportation and production costs will increase with the Carbon Tax. That may make the food industry of Canada less competitive, which in turn can impact prices. Climate change needs addressing, but short term the tax may hit consumer prices.
• Plastics: The Canadian government has the Pollution Prevention Planning Notice (P2), an ideal step to reduce plastic use. But it will alter how we deal with food waste which can increase prices. Positive sustainable efforts once again may lead to price changes.
• Household budget changes: Looking to the future, Canadians will likely continue to reign in spending. Changes in demand will have a significant impact on how grocers price food products.

Conclusion

Canada’s Food Price Report does show an increase in food prices. And, there will likely be more increases as we enter 2025. Canadians will feel the pinch as the cost of living increases.

This lack of food affordability can have catastrophic consequences on those with tight budgets or vulnerable populations. There may be an even greater impact on those already in debt. When it costs more to buy core products, debt payments can fall by the wayside. If you are in this situation with your finances, contact us at Chase & Associates for a free evaluation. We would be happy to advise the best next steps with you.