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Canada reaching 'end of the food inflation tunnel': expert

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While the rising cost of food continues to outpace the overall rate of inflation, one Canadian expert says the industry may have already reached its peak.

Statistics Canada reported on Wednesday the country's annual inflation rate rose to 8.1 per cent in June, making it the largest yearly change since January 1983.

Canadians also continued to see higher prices at the grocery store, with the cost of food up 8.8 per cent compared with June last year, although that rate is unchanged from May.

Both, however, are still higher than June's consumer inflation rate.

"Certainly, that's why people are still noticing higher prices at the grocery store and at the restaurant," Sylvain Charlebois, professor and senior director of the Agri-Food Analytics Lab at Dalhousie University, told CTV News Channel on Wednesday.

"But the good news is that I believe that our food inflation rate has peaked in our country, so we're starting to see the end of the food inflation tunnel, finally."

The price of gasoline, which rose more than 50 per cent in June compared to a year ago, is largely driving the latest increase in inflation, according to StatCan.

Excluding gasoline, inflation rose 6.5 per cent in June compared to 6.3 per cent in May.

The latest figures come after Canada witnessed a 7.7 per cent year-over-year increase in inflation in May, up almost a full percentage point from April.

Charlebois said inflation is rising faster in certain areas. Figures from StatCan show certain products have seen larger increases to their average retail price compared to others.

"But generally speaking, I think the food industry is starting to control elements related to the supply chain and the impact of the Ukrainian conflict, as well," he said.

Citing data analytics company NielsenIQ, Charlebois said Canadians also appear to be buying more food at dollar stores, with food sales up 18 per cent since March. He referred to this consumer trend as "trading down."

In a separate statement provided to CTVNews.ca, Charlebois said Canada's agricultural sector should also see a strong harvest this year, which will help keep commodity prices down.

But overall, he said he doesn't expect year-to-year prices to drop any time soon.

Recently, the Canadian Dairy Commission approved a second milk price increase of 2.5 per cent, or two cents per litre, for the year, which is set to come into effect on Sept. 1.

This follows an 8.4 per cent, or six cents per litre, increase in February.

Producers have pointed to increased production costs as the reason for the increase.

But the Canadian Taxpayers Federation has criticized the commission for giving pay raises and bonuses during the COVID-19 pandemic while raising milk prices.

"There's nothing wrong with bonuses, but the lack of transparency is simply unacceptable," Charlebois said in the emailed statement.

"Taxpayers and consumers deserve better. Our quota system was designed to make our dairy sector immune to inflationary cycles. Something is not working."

The Bank of Canada, meanwhile, increased its overnight interest rate to 2.5 per cent on July 13 in an attempt to temper inflation, following a series of increases earlier this year.

Charlebois said prior to the interest rate hike, the market was "flooded with cash," which helped increase prices including at the grocery store.

Now, with rising interest rates, some prices should expect to soften or drop, he said, while imports will become cheaper due to a stronger loonie.

However, he said further interest rate hikes by the U.S. Federal Reserve could add pressure to the Canadian dollar.

As for what lies ahead, a food price report for 2022 published by Dalhousie University, as well the University of Guelph, University of Saskatchewan and University of British Columbia, predicts that food inflation will rise by as much as seven per cent by the end of the year.

With files from CTV News and The Canadian Press

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