What’s driving sticky produce inflation?

Like many populations across the world, Canadians have experienced soaring food prices since the end of 2021. How are Canadians coping and what could be the root cause?

According to a series of surveys by the Canadian Produce Marketing Association (CPMA) to assess the impact of inflation on consumers between Q4 of 2021 and Q3 of 2023, Canadian consumer behaviours have changed in response to food inflation, with 83 per cent of Canadians finding it more challenging to cope with high prices and 55 per cent reporting shopping more often at value-oriented grocery stores.

Most consumers consult weekly flyer ads, with 70 per cent believing the featured items were less expensive. The use of online and print flyers varies, with 51 per cent and 44 per cent using online and print flyers, respectively, to make their weekly grocery list, while 41 per cent and 38 per cent consult online and print flyers, respectively, to determine where to shop.

The research also indicates that purchases in fresh departments of grocery stores decreased as a response to food inflation, with the produce section being the second most impacted after the meat department.

What’s driving the increase in produce prices? Many studies have highlighted the war in Ukraine, the costs of shipping, labour shortages, and supply chain disruptions caused by the pandemic, among other reasons. However, a preliminary report released this past June by the Global Coalition of Fresh Produce points to rising fruit and vegetable production costs worldwide. In the Global Coalition’s research conducted this past spring, 165 produce industry members across the globe unanimously reported experiencing unprecedented high production and operations costs during the COVID-19 pandemic.

These increases were led by costs of fertilizers at 60 per cent, construction at 48 per cent, fuel and shipping at 41 per cent each, and electricity at 40 per cent. All these led to a rise in the selling prices of produce by 14 per cent in North America, 11 per cent in Europe, 13 per cent in Oceania, 23 per cent in Africa, and 13 per cent in South America.

Despite raising produce prices, most industry members said these increases were insufficient to cover the high production and operations costs. As a result, some industry members have put investments, innovation and expansion plans on hold.

The pandemic threatened Canadians’ access to food, revealing our fragile produce supply chain. Although resilient, the ongoing inflation has accentuated food insecurity, forcing consumers to change their shopping habits and industry members to adjust their operations and strategic plans. These calls for industry and government collaboration to examine the impacts and work together to develop policies prioritizing Canadians’ food access.

Ron Lemaire is president of the Canadian Produce Marketing Association (CPMA)