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Input costs, supply chain disruptions, and workforce availability are all driving up the price of food

By: RealAgriculture News Team

November 4, 2021

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Foodbanks are reporting more use across Canada, and any recent trip to the grocery store proves that lately the same amount of money buys less food. But what’s causing that price hike?

Al Mussell, research lead at Agri-Food Economic Systems, says that there are several things coming together right now that are increasing the cost of food.

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In the recent past, some pretty high farm prices combined with disruptions in supply chains, and disruptions in workforce availability combined, are driving inflation, says Mussell.

“We really try to avoid food price inflation because it does end up becoming a form of regressive tax,” says Mussell. “In other words, its effects are the most significant on the lowest income strata of society, so it’s really something that’s important and that we need to address.”

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While some inflated food costs can be media-driven, as previously explained by Kevin Grier, Mussell says that the recent recommendation from the Canadian Dairy Commission to raise farm gate milk prices is a good example that high feed costs and energy prices create high input costs, which is linked to the output price.

“I’m not sure we should be all that surprised about it because the prices of things that go into the cost of production, as all farmers know, have gone up, and the system in which supply management is operated in, that’s linked directly to their pricing,” says Mussell, adding that in poultry, those prices are updated on a more regular basis, whereas in dairy it’s an annual cycle.

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Mussell’s not sure how long the inflated food prices will last, possibly into 2022, and he’s also not sure what the correction course would look like, especially if the tougher food-related jobs aren’t filled again. He’s also not sure if the inclination of central banks raising their interest rates will work all that well.

“Increasing interest rates works if you’ve got an overheated economy, in the sense that people are borrowing too much money to buy too much stuff,” says Mussell. “Increasing interest rates, decreases their ability to borrow, so they can’t buy as much stuff.”

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Increasing interest rates doesn’t solve the problem of physical infrastructure problems, he says.

“It doesn’t sound like these two things should be connected, but if you go and look at some of the information around poverty, particularly poverty in urban areas, food and access to healthy adequate affordable food, it always comes up. But a lot of it is actually tied to real estate and the cost of rent in urban areas.”