2y ago

Canada’s inflation rate is plummeting, so why are grocery prices still so expensive?

www.ctvnews.ca Canada’s inflation rate is plummeting, so why are grocery prices still so expensive?

Economists say there are a number of factors driving up food prices, but they expect food inflation to slow over time. Here's a look at what’s behind Canada’s high grocery prices and what to expect in the coming months.

TLDR; climate change, Russia, supply chain not recovered, labor shortages; more price increases expected :/

66 comments

This is such a dumb headline.
The rate of price increases slowing doesn't mean that prices go down. It means that prices increase more slowly.
ETA: we aren't experiencing deflation. And we probably don't want to.
- doesn’t mean that prices go down
  But, to be fair, they are going down. The price I can get as the farmer is 30-50% of what it was last year.
  You're still paying more at the grocery store because what you are eating now, I sold you last year (maybe even the year before). Turns out people don't like surprises when it comes to food, and want to ensure that we grow enough to feed them, so they generally buy it years in advance.
  
  Your price might go down, but that's because you have the least amount of leverage. Same applies to customers, and to any smaller entity in the supply chain.
  I'd also note the LCL, Empire and Metro didn't hesitate to push on supplier increases, but also didn't hesitate to raise resale at the same time. Most of them are seeing increased margins and they're all seeing higher profit, which, if we had a fair tax structure, wouldn't happen.
  I work in distribution. Other than select contract negotiations at very high volumes, I can't think of the last time I saw a price decrease go through, though I will say our fuel surcharge at least isn't going up. So the rate of increase is slowing, but resale prices, by and large, are not going down. At best, this is the "new normal"
- Agreed! ...and you made a smart observation about prices.

All of those reasons are BS if grocery stores are still posting record profits.
Edit: grammar

Because retailers took advantage of inflation to push profits even higher, especially one specific retailer who has a vertical monopoly in the grocery sector, of which they’ve been caught and convicted of using to fix the prices of bread in the past.
They’re still high because food is a staple, a necessity. Competition can’t spin up in several months. And competition certainly can’t compete with this existing farm to grocer system.
These prices are never coming down. They’d keep going higher if people weren’t so angry they were stealing instead.
The best protest is to not shop there.
I know. Sounds stupid.
Farmers stands. Farm to table markets. Farmer’s markets.
Call farms and see if you can place orders. They need larger orders? Start ordering with friends, neighbours, family.
This stuff is grown in our backyard, and we are paying for some guy to buy it to sell to some other guy for a huge mark up so we can pay even more for no reason.
- https://beta.ctvnews.ca/national/business/2023/4/5/1_6344721.amp.html
  Tale as old as time. Prices go up. CEO pay goes up. Wages go down. It's a real head scratcher.
  
  And a tale that has been told throughout the ages, yet, despite that, Canadians still somehow think they need to go to university and get a job instead of using that capital to become the CEO of their own company. It is a real head scratcher, indeed.
- How do I not shop there when I only have 2 options. Do I just stop eating ?
  
  Well, you kind of accept that you don't have options for anything when living in the extreme north of Canada.
  The remaining ~99% of Canadians live amongst farmers, though. We've built our largest cities on literally the best farmland in the country to ensure that the food is right there. They have thousands of options.
- It's the market that controls the prices. Many shops won't rise prices because they would lose customers, if many others don't.
  But after an agreed price rise, it's a different situation. It takes more time to sell cheaper, because the shops want to pretend that stuff is expensive just a bit longer.
  Just have some patience and try to avoid the expensive stuff, as much as you can for some time. The biggest risk for shops is that someone finds alternatives and actually never again buys the previous product. They'll panic and prices will fall drastically.
  
  Just have some patience
  Lmfao, as if the companies making record profits are suddenly going to stop doing what they're designed to do (constantly keep breaking those records), if we just give them some time...

My car stopped accelerating. Why am I still going so fast?
- Good analogy. Inflation is a rate of change.
- Hopefully that wall will slow us down!
  
  I think I see a bottomless pit ahead if we miss the wall. :-)

so why are grocery prices still so expensive?
Capitalism.
- "Inflation" is just the polite way of saying "if billionaires find out you've still got money, they'll fuck you out of that too".
  It's apparently why we can't just raise wages or give useful amounts of welfare to the people who need it. We have to sneak the money to people, lest the billionaires find out.

No matter what the inflation rate prices will not go down, for prices to go down you need deflation which is not likely to happen. Prices will always go up, it's just the speed of which they go up that changes.
- We saw deflation as recently as 2020. Prices do not always go up.
  Moreover, every single high inflationary period in history, save one time, has seen deflation occur soon after. Why do you think this will be the second outlier, especially when the driving forces are closer to every other time and quite unlike that one unique time?
  
  To be fair, 2020 was a little weird.

TLDR; climate change, Russia, supply chain not recovered, labor shortages; more price increases expected :/
You list all the reasons but the one that actually matters and is responsible for all of the others: capitalism.
Why do people find it so hard to say/admit?
- Under capitalism we don't produce food for the purpose of feeding people, we produce it to make a profit. If a person can't afford to buy food, we let the person starve and the food rot on the shelf.
  
  Back when I worked in a grocery store one of my regular tasks was processing unsalable product. There is... a lot that gets thrown away. And from what I hear it is much worse in other parts of the world.
  
  There are some exceptions, but the vast majority of farms in Canada, and around the world, operate under a socialist model – they are owned by the workers.
  What you describe isn't a feature of capitalism, it is a feature of human nature. Someone giving up their life to grow food wants something in return. People don't like having to give up their life, so if you have nothing to offer in return, people don't take too kindly to that.
- Oh, it’s a TLDR of the article, not my opinion.
  The grocery stores record profits make it obvious they have more than enough room to absorb a lot of the upstream pressure for price increases. They don’t feel compelled to do so in any way though :/
  
  Sorry, I should have been more clear, my criticism isn't of your TL;DR, it's of the fact that it didn't include capitalism (which I understand is because the article doesn't, which is what I'm criticising).
  
  The margins have grown considerably in the past year, yes, but they also know what's coming. Make hay while the sun shines.
- They actually do address it. By handwaving it away with practically no analysis. This article might as well be paid for by the grocery industry.
  BIG GROCERS DICTATING FOOD PRICES Many Canadians have pointed the finger at big corporations for how expensive groceries have become over the past few years, but Huggins said the issue of high food prices is a bit more complex.
  In Canada, five retailers — Loblaw, Sobeys, Metro, Walmart and Costco — control an estimated 80 per cent of the grocery market share, according to a 2021 study from the federal government.
  As Huggins pointed out, these companies make up an oligopoly, which is a market dominated by a small group of suppliers, so they are able to exercise their power in the market and have “very protected profit margins.”
  However, he said there hasn’t been much evidence of them abusing their power in the market to drive up food prices in the last two years.
  “In the early days of the pandemic, there was some jockeying for price increases, mostly because there were big supply disruptions happening, but we haven't seen an enormous amount of it,” he added.
  “They've certainly been able to prevent their profits from coming down, but I haven't seen a lot of exploitative size numbers.”
- Came here to say the same. Greed.

A lower Inflation rate doesn’t equate to lower prices. It equates with those prices not rising as much and as fast…but as long as the rate is positive, those prices are still going up.
- True, except the rises so far have been much larger than inflation warrants, with the expectation for a correction at some point, which is what the article discusses.
  
  Until the conflict in Ukraine is resolved, I’d expect those prices to still be up. Wheat and oil being impacted in that conflict have major repercussions across the supply chain across the world.

Corporate profits

A more helpful question is to ask why prices are increasing when Loblaws and company have been making record profits since 2020.
I mean, I know why, but
- For those who don't know why:
  To preface, there are two sides to every transaction: Something being offered, and something being traded in kind. Exchanging parties must feel that both sides of the transaction are of equal value in order to see a transaction carried out. The unit of measure used to determine where that equalization point is found is known as price.
  On one side of the transaction, the value of what is being offered had been declining in value at a rate not seen in a long time. This means that it takes more of that thing to equalize the other side of the transaction. COVID factors has lead people to not see this thing as being as valuable as they once did. While that decline has pretty much settled down now, it does partially explain why prices have risen up to this point.
  On the other side of the transaction, the value of what is being offered has been increasing in value at a rate not seen in a long time. This means that it takes less of that thing to equalize the other side of the transaction. The Ukrainian conflict suggesting that famine is a real possibility has reminded people that they shouldn't take this thing for granted, and as such they now consider it more valuable. This explains the remainder of the price growth.
  
  As a farmer we haven't even seen the beginning of food inflation. The entire country and much of the world is in drought, and we're only entering this El Nino cycle.
  I sold all my animals and my crops are a wash. Drought has crushed yields over a vast area of Canada's agricultural land. Combining the other factors at play such as war between two massive grain producers, there's a chance that global food demand could actually outstrip production this year, for the first time since the start of the Green Revolution.
  With that said, processors and middlemen are definitely grabbing the large portion of the increased value of food at the stores. Cattle prices are up but nowhere near the extent that beef has risen, and will soon plummet as animals are dumped on the market for lack of feed. What won't plummet is the consumer price of beef, I can almost guarantee it. And I shudder to think of what grain and bread prices could be by the end of this year. Very glad to have a freezer of meat, huge garden, a good wheat grinder and bins of grain that would last my family decades.

Economists say there are a number of factors driving up food prices
GREED. The answer we were looking for is greed. Thanks for playing.

Inflation is not prices, it's a rate of increase of prices. Even if Inflation is at 0%, prices won't decrease, 0% mean prices stability. To see prices diminish, Inflation would need to be negative, in that case it's depression.
- Actually deflation, depression is a reduction in the total throughput of a country for a prolonged period (not stational).
- Inflation is not prices, it’s a rate of increase of prices.
  Inflation attempts to measure the decreasing value the of currency as observed over time. The change in price across a certain basket of goods is the proxy used to determine that.
  Even if Inflation is at 0%, prices won’t decrease
  All else equal, a decline in value of the currency means that price will rise. However, there are two sides to every transaction. The thing on the other side may also decrease in value. If that other thing decreases in value faster than the currency, then it is possible for inflation to be >=0% and for the price to still fall.

because groceries price increases were because of companies getting rich, and not inflation.
/story
- Yep. It's an oligopoly

That TL,DR is missing the actual reason... Extended pandemic profiteering to "get even" with consumers for staying inside for half a week and not shopping at their fullest potential.
Capitalists are quoted as saying, "we will be made whole, and then some, and you'll apologize for what you did to us."

What is Late-stage Capitalism, Alex?

Corporate billionaire/millionaire wealth tax now.

This is the best summary I could come up with:
With extreme weather events like droughts, wildfires and flooding becoming more frequent in Canada and around the world, as a result of climate change, Fan said farm production and supply chains are impacted, applying some pressure on overall food inflation.
Extreme weather is one of the major threats that RBC has identified for food inflation for the upcoming decade, Fan noted, because it will likely lead to “a lot more volatility and uncertainty.”
Russia’s invasion of Ukraine in February 2022 resulted in additional upward pressure on global food prices due to the role the two countries play in agricultural and oil production.
In Canada, five retailers — Loblaw, Sobeys, Metro, Walmart and Costco — control an estimated 80 per cent of the grocery market share, according to a 2021 study from the federal government.
“It takes all these things to start to normalize — the supply chain, which it did since late 2021, wage growth in Canada is still kind of elevated at the moment, … the impact on commodity prices from the Russian invasion to Ukraine.”
“My best assessment is that things will get a little bit better than they are based off of conditions that they are at the moment and so they'll slow down, which will be nice, quite frankly, because there's a lot of people who are remarkably angry about prices that have sort of risen in the last few months,” he said.
I'm a bot and I'm open source!

Because they can.

I would imagine part of it is related to the same reasons why my business’s prices are still high: rapidly rising insurance and increased costs of materials due to supply lines that were negatively impacted due to the slow down that was caused by COVID.
I’ve had literally dozens of customers in the last two years look at my quotes, balk and then go shopping for a better deal only to come back to me when they realize this is the new normal. Then they have to deal with the fact that contractors like me are booking new projects for 2025-26.
- See I have a feeling the bullshit is coming further upstream. The core providers are using covid to gauge business further down, then the smaller businesses are passing on the cost and in some cases adding even more on top because of "covid".
  The whole thing smells to high heaven as the assholes at the top are making money hand over fist.
  
  The buyer sets the price. Inflation tells half the story, but the other half is that the people generally believe that things like food are worth more now. When the Ukraine conflict began, people started seeing famine as a real threat, which put them in "Oh shit, I'd better not take this thing for granted anymore!" mode.
- I think your comparison of your industry to the grocery industry likely isn't particularly akin, the grocery industry is much more...peculiar, or at least idiosyncratic than most, which is illustrated by the price of groceries not being in line with inflation.
  
  the grocery industry is much more…peculiar, or at least idiosyncratic than most
  In what way?
  Inflation is only concerned with the value of the currency. Like everything on the other side of the transaction, food has its own independent value. One that has risen, largely due the Ukraine conflict reminding people how vulnerable the food supply chain is, and them now seeing food as being more valuable than in the recent past. They are willing to pay more – much more, in a lot of cases – because of that.
  Let's not forget the farm gate price peaked in 2022 at around ~100% over 2018 prices – for a number of reasons, but the EU fertilizer plant shutdown quickly followed by loss of access to Russian fertilizer being a primary driver. That is what you're currently feeling at the grocery store. The farm gate price is now down ~50% off the peak. You will start to see that roll into the grocery store within the next year. Remember, wholesale food is largely purchased on futures contracts. You, at the store, are mostly buying what the farmer sold in 2021-2022 right now.
  Frankly, the grocery industry is one of the least idiosyncratic markets around.

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