Murray Wood: Who's scary... and who's scary good?
Every Friday, Murray Wood takes a look at the week's news and decides who's hot... and who's not. This week, in a specia...
Despite Canada’s inflation rate slowing to 2.8 per cent last month, grocery bills are expected to remain high.
Annual inflation on grocery prices climbed to 9.1 per cent in June. The biggest jump over the last year was in fruit prices, which rose by 10.4 per cent, while beef prices were up 6.9 per cent from last June.
Sylvain Charlebois, who studies food distribution and policy at Dalhousie University, explained why this is happening.
“It appears as though every month there’s a different picture in terms of what category is pushing prices higher. This month, meats and fruit prices have been pushed higher,” he said.
“Wholesale prices have gone way up beyond resale prices for a long time. I think there’s some recalibration going on between wholesale and resale, and we know it’s been going on for several months now.”
He said forecasters have seen this coming for a while.
“In the late winter and early spring, we saw cattle futures spike dramatically,” Charlebois explained. “When that happens, we typically expect retail prices to be readjusted, and that’s what we’re at right now. Perhaps we may see breaks as we get to the holiday season in December.”
It could take another year or two before beef prices drop, Charlebois said, because the beef market takes a lot longer to reset than other industries.
“The beef cycle is much longer than with hogs, pork or poultry. That’s the nature of the industry,” he stated. “It doesn’t move as quickly. That’s why when beef prices go up they don’t come down that quickly.”
While the grocery inflation rate was only up 0.1 per cent this past June compared to May, things could be getting worse in the coming months because of Russia leaving its Black Sea grain deal, which allowed the export of Ukrainian grain to various other ports.
Charlebois said Russia backing out of the deal could create problems for the entire world, and not just Europe.
“This is a worldwide problem. Humanity needs a grain deal. Ukraine feeds 400 million people with its agriculture,” he said.
“Humanity cannot afford to eliminate that option. If there’s not grain deal, the price of inputs for everything will go up, and that’s what happened last year and we all paid for it.”
The deceleration in Canada’s inflation rate was broad-based, though lower gasoline prices compared with last year led the slowdown.
The annual inflation rate was 3.4 per cent in May. The last time it fell below three per cent was March 2021.
According to business analyst Paul Martin, the main factor that has driven the inflation rate down is transportation.
“Gasoline, interestingly, is down around 20 per cent nationally compared to a year ago,” said Martin. “The price of vehicles is also starting to drop.”
The clean fuel tax wasn’t factored into the transportation numbers, so Martin expects to see those numbers jump in July.
The price of cellphone contracts went down as did travel, according to Martin.
While the inflation rate has dropped, food prices and mortgages continue to rise, and with Russia cancelling its grain deal with Ukraine, the world supply of grain is diminished. With fewer supplies, those prices will continue to rise.
Martin said there really is nothing that is pushing the prices of groceries down.
“The amount of area in Saskatchewan that is experiencing drought, we are not going to have a huge crop this year,” said Martin. “That is going to raise prices.”
— With files from The Canadian Press
