Canadian consumers will have to pay more for food this year, according to the 2016 Food Price Report from University of Guelph researchers. After a year in which a lagging Canadian dollar led to substantial price jumps for many products, shoppers will face smaller increases in 2016, especially for meats, fruits and nuts, and vegetables.
Overall, the researchers expect price increases averaging two to four per cent, above the general rate of inflation. The struggling Canadian currency, climate factors and consumer trends will all play important roles in 2016, said Prof. Sylvain Charlebois, lead author of the sixth annual report from the Food Institute of the University of Guelph.
“This means the average household will likely spend $345 more than in 2015 for the same exact food,” said Sylvain Charlebois, of the Marketing & Consumer Studies department. “The biggest factor could be the Canadian dollar. For every cent the dollar drops, foods that are imported likely increase one per cent or more. For fruits and vegetables, unlike with meats, it’s more challenging to find substitutes in Canada, so shoppers will have to cope with higher prices.”
In 2015, the sudden currency drop led to fruits, vegetables and nuts increasing in price by nine to 10 per cent. The researchers anticipate that those prices could increase in 2016 by up to 4.5 per cent. One potential improvement is more rain forecast for the United States in 2016 due to the effects of El Nino. “This could mean more supply from those states where farmers had struggled in recent years,” said Sylvain Charlebois. “It could also help U.S. cattle and pork producers, though inventories will take some time to rebuild.”
Meat prices, which rose 5% in 2015, could rise by 4.5% in 2016. The researchers do not expect Canadian grocery shopping patterns to be affected by a statement from the World Health Organization that processed meats increase cancer risk. But they said higher food prices could make a difference. A 2015 survey by the Food Institute found that higher beef prices led one-third of consumers to seek alternative protein sources, such as chicken, fish, lentils and chickpeas.
Food Institute researchers expect only minimal price increases for seafood. Canada is a net seafood exporter. Consumer demand for more supply chain transparency might have a more immediate impact, said Sylvain Charlebois. “People want to know what is in their food and the animal welfare conditions. Social media facilitates consumers’ influence, and companies have noticed. For example, McDonald’s is focusing more on animal welfare. One current trend is the demand to use less antibiotics in animals.”
The Report notes that food prices in stores rose by 4.1% in 2015, which was significantly above inflation. This means the average Canadian household likely paid about $325 more for food in 2015. The Canadian dollar lost almost 10% of its value in only one month in early 2015. For the first time, the Food Institute revised its forecast for two categories: vegetables, and fruits and nuts. These categories are known to be highly vulnerable to currency fluctuations as 81% of all vegetables and fruits consumed in Canada are imported.
In other areas, also, the Report notes increases. Meat prices rose 5% in 2015, as expected, and a high proportion of consumers have changed their beef consumption behavior due to increase in meat prices. “Canadian consumers are more likely to search for new protein alternatives, which may cause lower demand for meat and higher demand for vegetables and grains in future. Fish and seafood prices rose by 2.4%, which is slightly lower than forecasted. Canada being a large exporter of fish and seafood, this result was not surprising. Grain products like bread and bakery rose by 2.9% which was higher than forecasted.
For the first time, we may see Canadian sales from the fast food industry exceed those of the full service industry in 2016. Offerings in fast food generally have enhanced and many chains offer natural, antibiotic-free meat products. Animal welfare has also been recognized as a driver in fast food, more so this year than ever before. McDonald’s Canada decision to procure only cage-free eggs by 2025 is just one of many examples.
Predicted food price increases for 2016: