Global supply chain could see some improvements, but food inflation continuing to gouge Canadians

While Canadians and people globally are coping with significant inflation and a rising cost of living, there is some good news on the horizon.

Sylvain Charlebois, a professor in food distribution and policy at Dalhousie University and the senior director of the Agri-Food Analytics Lab, told CTV’s Your Morning that there are some improvements in the global supply chain and there could be a better outlook for food prices in 2023.

While next year may not be significantly “easier” than 2022, “when it comes to supply chains, things are much easier than just 12 months ago,” Charlebois said Thursday.

There’s also some good news looking at wheat futures, as of Thursday, they are down, he said.

Russia had initially pulled out of its grain deal with Ukraine amidst the war, that would have prevented Ukraine to export grain. Up to Wednesday, Russia had signalled it would pull out.

As Russia and Ukraine are very large grain producers, any shortage of exports would impact the prices of grain as it’s a global commodity, said Opher Baron, a professor of operations management at the University of Toronto's Rotman School of Management, in an interview with CTVNews.ca on Tuesday.

On Monday morning, wheat futures increased by close to six per cent on news that Russia would not allow grain to be exported out of Ukraine.

Russia reversed course on Wednesday, when it agreed to restore the agreement.

“Grains are flowing out of Ukraine, leaving some space for this year’s harvest,” Charlebois said.

“Barley prices are cheaper, they are lower, and for processers out there it will probably cost them less than predicted to buy the barley and the wheat,” said Charlebois.

But at the same time, the cost of agricultural production has increased in 2022 due to overall inflation. This also impacts the heightened costs around dairy products including milk and butter, he said.

“Dairy products are becoming more expensive already due to an increase we saw this year, more than 11 per cent,” he said.

“Feed, energy costs during the winter, dairy farmers have to heat barns, that’s a big expense…to capitalize their operation costs a lot of money,” he said. Rising interest rates have also put pressure on farmers, he explained.

Those dairy prices should level off by the spring of 2023 which will provide some relief for consumers, he said.

Before then, milk prices will be expected to go up again in on Feb 1., 2023 as the Canadian Dairy Commission said Tuesday that it has approved a 2.2 per cent increase, which adds up to just under two cents per litre, according to reporting from the Canadian Press.

Those hikes come after two price increases in 2022, which were 2.5 per cent in September and 8.4 per cent in February.

In response to rising food costs, the Competition Bureau of Canada announced in late October it was launching a study into grocery store competition to see how governments could combat price increases.

The competition agency said in its announcement that Canadians are seeing the fastest increases in food prices in 40 years, all impacted by extreme weather, Russia’s invasion of Ukraine, and supply chain disruptions.

The findings will be released in June 2023.

With files from CTVNews.ca’s Daniel Otis and Rachel Aiello