Canadian families will pay $1,065 more for groceries in 2023, report says

HALIFAX -

Canadians won't escape food inflation any time soon.

Food prices in Canada will continue to escalate in the new year, with grocery costs forecast to rise up to seven per cent in 2023, new research predicts.

For a family of four, the total annual grocery bill is expected to be $16,288 -- $1,065 more than it was this year, the 13th edition of Canada's Food Price Report released Monday said.

A single woman in her 40s -- the average age in Canada -- will pay about $3,740 for groceries next year while a single man the same age would pay $4,168, according to the report and Statistics Canada.

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Food inflation is set to remain stubbornly high in the first half of 2023 before it starts to ease, said Sylvain Charlebois, lead author of the report and Dalhousie University professor of food distribution and policy.

"When you look at the current food inflation cycle we're in right now, we're probably in the seventh-inning stretch," he said in an interview. "The first part of 2023 will remain challenging ... but we're starting to see the end of this."

Multiple factors could influence food prices next year, including climate change, geopolitical conflicts, rising energy costs and the lingering effects of COVID-19, the report said.

Currency fluctuations could also play a role in food prices. A weaker Canadian dollar could make importing goods like lettuce more expensive, for example.

Earlier this year the loonie was worth more than 80 cents US, but it then dropped to a low of 72.17 cents US in October amid a strengthening U.S. dollar. It has hovered near the 74 cent mark in recent weeks, ending Friday at 74.25 cents US.

"The produce section is going to be the wild card," Charlebois said. "Currency is one of the key things that could throw things off early in the winter and that's why produce is the highest category."

Vegetables could see the biggest price spikes, with estimates pegging cost increases will rise as high as eight per cent, the report said.

In addition to currency risks, much of the produce sold in Canada comes from the United States, which has been struggling with extremely dry conditions.

"The western U.S., particularly California, has seen strong El Nino weather patterns and droughts and bacterial contaminations, and that's impacted our fruit and vegetable suppliers and prices," said Simon Somogyi, campus lead at the University of Guelph and professor at the Gordon S. Lang School of Business and Economics.

"The drought is making the production of lettuce more expensive," he said. "It's reducing the crop size but it's also causing bacterial contamination, which is lessening the supply in the marketplace."

Prices in other key food categories like meat, dairy and bakery are predicted to soar up to seven per cent, the researchers found.

The Canadian Dairy Commission has approved a farm gate milk price increase of about 2.2 per cent, or just under two cents per litre, for Feb. 1, 2023.

"The increase for February is reasonable but it comes after the unprecedented increases in 2022, which are continuing to work their way through the supply chain," Charlebois said of the two price hikes of nearly 11 per cent combined in 2022.

Meanwhile, seafood is expected to increase up to six per cent, while fruit could increase up to five per cent, the report said.

Restaurant costs are expected to increase four to six per cent, less than supermarket prices, the report said.

Rising prices will push food security and affordability even further out of reach of Canadians a year after food bank use reached a record high, the report said.

The increasing reliance on food banks is expected to continue, with 20 per cent of Canadians reporting they will likely turn to community organizations in 2023 for help feeding their families, a survey included in the report found.

Use of weekly flyers, coupons, bulk buying and food rescuing apps also ticked up this year and is expected to continue growing in 2023, the report said.

"We're in the era now of the smart shopper," said Somogyi, also the Arrell Chair in the Business of Food.

"For certain generations, it's the first time that they've had to make a list, not impulse buy, read the weekly flyers, use coupons, buy in volume and freeze what they don't use."

Last year's report predicted food prices would increase five to seven per cent in 2022 -- the biggest jump ever predicted by the annual food price report.

Food costs actually far exceeded that forecast. Grocery prices were up 11 per cent in October compared with a year before while overall food costs were up 10.1 per cent, according to Statistics Canada.

"We were called alarmists," Charlebois said of the prediction that food prices could rise seven per cent in 2022. Critics called the report an "exaggeration," he said.

"You're always one crisis away from throwing everything out the window," Charlebois said. "We didn't predict the war in Ukraine, and that really affected markets."

This report by The Canadian Press was first published Dec. 5, 2022.