Food prices are set to outpace overall inflation and rise by as much as 4 per cent in 2016 as the low Canadian dollar drives up the price of imported fruits and vegetables, according to the Food Institute at the University of Guelph’s forecast.
The jump of about $345 in the average household’s annual food bill to $8,600 follows a similar increase in 2015, when the plunge in oil prices drove down the Canadian currency to less than 75 U.S. cents.
However, the El Nino weather system should bring rain and bigger harvests to California and other parts of the United States that grow much of Canada’s fruits, nuts and vegetables, said Sylvain Charlebois, a Guelph professor and co-author of the report. The bigger crops should cap the rise in prices for the food category at 2 per cent to 4.5 per cent, after the region’s drought sent crop prices up by more than 9 per cent in 2015.
Canada imports 80 per cent of its fruits and vegetables, a category that is both sensitive to swings in the currency and has few easy substitutes.
In recent years, retailers have been forced to absorb price increases amid fierce competition. But with the disappearance of Target, and moves by Loblaw and Sobeys to buy other retailers, consumers are more likely to bear the cost of price hikes immediately. “The retail landscape is much less competitive than it was a few years ago,” Prof. Charlebois said.
“Even though Target was considered as mediocre food retailer at best, it gave a shock to the system, and that’s why we saw Loblaw acquiring Shoppers Drug Mart and Sobeys acquiring Safeway.”
