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Higher food prices will add to our financial burdens

Trips to the grocery store are a regular occurrence, and even more so at this time of year: For most of us, the holidays are all about the food, from the turkey with all the fixings to the seemingly unending stream of baked goods and not-good-for-our-waistline snacks.

In the midst of the season’s binging comes word we can expect some sticker shock in the grocery aisles next year.

Food prices are expected to rise three to five per cent next year, adding as much as $420 to the annual cost of feeding an average family.

That’s well above both inflation and the kind of increases we’ve seen in recent years when we’ve seen prices of some grocery items take big jumps.

The predictions for 2017 are part of the seventh annual Canada’s Food Price Report, released this week.

An increase of three to five per cent in food prices would be considerably higher than the rate of inflation (typically 1-2 per cent), and larger than hikes in 2016 (about 2.5 per cent). While dairy/eggs and bakery/cereal are expected to remain stable and within acceptable inflation rates, other foods could see much higher increases: fruits and nuts by three to five per cent; vegetables, meats and other food items by upwards of four to six per cent, according to the study, which was led by Prof. Sylvain Charlebois, dean of the Faculty of Management at Dalhousie University. He previously led the project from the University of Guelph.

The biggest factor in price increases will be the falling Canadian dollar, say Charlebois. “Given how many food products we import from abroad, our food economy is vulnerable to currency fluctuations.”

Other drivers that inform the report’s projections include La Nina weather patterns and the incoming Trump administration in the U.S. — which, while rife with uncertainty, suggests a forthcoming period of American protectionism that could initiate a “commodity super-cycle,” raising food prices for Canadians, the report finds.

If the predictions hold, the increases would be a dramatic reversal of actual price drops seen in the latter part of this year.

“Higher than expected inventories for many food products, higher agricultural outputs and more pressure imposed on processors by distributors led to lower food prices compared to last year. Canada joined a large group of mature economies experiencing food deflation late this year. The fact that grocers adopted a defensive strategy against food deflation only accelerated the process and prompted prices to drop further. Loblaw, Sobeys, Metro and several other food distributors submitted unilateral requests to their vendors to lower prices at wholesale, from anywhere between a freeze of prices to a discount of 1.45%.”

Although unforeseen, the downward pressure on the retail end is expected to give way to the higher costs associated with factors such as the value of the loonie, U.S. protectionism and perhaps rising transportation costs.

While consumers won’t be turning cartwheels over higher prices, there is a silver lining if it leads to greater health in the farming sector. Yo-yo pricing, at times lower than the cost of growing crops, has wreaked havoc in the industry. It has also led to all kinds of government subsidies and support programs, which we all pay for indirectly.

If farmers prosper, rather than middlemen, we could all benefit.

A little more local for your inbox.

Seven days. One newsletter. Local reporting about people and places you
won't find anywhere else. Stay caught up with The Observer This Week.

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