Chrystia Freeland deputy prime minister and finance minister addressed a milestone moment as Canada approaches its target level of inflation for the first time in excess of two years as levels crash to 2.8% in June, however, Canadians still have a hard time at local grocery stores. Experts indicate that there are a number of influences escalating food prices, which were pushed to 9.1 % year – over – year in June, and predict this food inflation to simmer down over time.
An economist at RBC Claire Fan in an interview told that a combination of many factors is at play nudging the food prices higher. A teacher in finance and business economics at McMaster University in Ontario Will Huggins said, it is easy when a single factor is to be blamed, however, we are faced with many small factors impacting together.
The decline in the Canadian Dollar against the U.S dollar by 10 percent, is one of the main factors affecting prices, mainly fresh fruits and vegetables, Higgins informed. This fall in value indicates whatever is imported from U.S to Canada is more expensive, resulting in an increase in prices of products in grocery stores to reflect the change.
Experts blame the higher food costs partly on the adverse climate and weather conditions, such as wildfires, droughts and flooding. Canada has experienced an increase in extreme climate changes in recent years. Farm supply and production chains are affected and Appling pressure on food inflation, Fan informed. He further stated that RBC has identified extreme weather conditions as one of the significant threats for food inflation for the upcoming decade, leading to a lot more volatility and uncertainty.
Geopolitical Turmoil, mainly the Russian – Ukraine war have contributed to the rise in food prices in Canada. This invasion in February 2022 fueled the upward trend on global food prices as the two countries play a crucial role in agriculture and oil production, resulting in the increase in prices of natural gasses, fertilizers and wheat.
It is noted there are various smaller but noticeable impacts from influences such as supply chain issues initiated from the pandemic, labour shortages and big grocers dictating food prices have collectively impacted the price hike.
Fan and Higgins informed that they don’t expect the price of food to reduce significantly over night, but predict food inflation in the coming months to slow down.
