Food Price Stabilization: A Welcome Break or a New Normal?

Canadians could be forgiven for breathing a small sigh of relief these days. After years of relentless food price hikes, the pace of food inflation is finally decelerating. Projections show food prices rising by 2.2% to 2.5% in 2024, down from last year’s punishing 5.8%. The longer-term forecast for 2025 is even milder, with food prices rising a predicted 1.6%. But here’s the rub: slowing inflation doesn’t mean prices are dropping. They’re simply rising at a slower rate than before. Those pre-pandemic grocery bills? They’re not coming back.

While the grocery store aisle might offer a small reprieve, the same can’t be said for dining out. Restaurants aren’t spared from the pressures squeezing the industry, and they’re responding by hiking their menu prices yet again. Food-away-from-home costs are expected to increase by 4.1% in 2024. The kitchen table is becoming more of a necessity than a choice for many, a move dictated by the cost of living.

Yet, despite this inflation slowdown, grocery prices across Canada will still rise by up to 4.5% in certain provinces. In regions where supply chain constraints are already challenging, such as northern and rural communities, food security will likely remain a critical concern. While predictions indicate more stability, the days of inexpensive essentials, from beef to olive oil, appear to be permanently behind us.

Consider the complex factors driving these trends. Beef prices alone tell a story of cyclical cattle herds and extreme weather. Kevin Grier, a market analyst, traces the price of beef to North America’s shrinking cattle herd, the smallest in nearly 40 years. Years of drought have reduced pastures and pushed feed costs sky-high, forcing ranchers like Tyler Fulton to make tough decisions. Do they sell cattle now or hold out, hoping for lower feed costs? It’s a gamble with no guarantees, one that leaves us with higher beef prices as the industry seeks stability.

For a brief period, some food categories might even see modest price drops—think strawberries and broccoli, two staples that fared well this year thanks to favorable growing conditions. However, don’t expect this trend to continue across the board. Many products, from grains to oils, remain at the mercy of global weather patterns and other uncontrollable variables. In the case of olive oil, drought in Spain, Greece, and Italy has devastated production, leading to the $17-per-litre prices we’re now seeing. With such extreme conditions, any significant price drop is unlikely in the foreseeable future.

When it comes to infant formula, the story is no less complex. The 2022 Abbott Laboratories recall due to contamination fears put North America’s dependence on a few big suppliers into harsh perspective. Canada has since approved its first domestic formula producer, but that small win does little to address the real issue. Families remain exposed to supply disruptions, and formula prices remain high, reflecting a market squeezed by both regulation and scarcity.

Moreover, the grocery industry itself has come under fire for its part in the inflation story. With 80% of Canada’s grocery sector dominated by five major players, questions about competition have surfaced, especially as these giants record unprecedented profits. The recent “shrinkflation” trend—where products quietly shrink in size but not price—reflects a strategy of managing consumer expectations in a landscape where true price reductions are rare. Loblaws’ impressive profits in 2022 and 2023 are often attributed to its pharmacy sales, yet consumers see them as part of the larger inflation problem, further complicating the public trust.

The federal government has attempted various strategies to combat these increases, from grocery rebates to a new grocery code of conduct. Yet, these efforts will do little to slash prices in the near term. The code, aimed at evening the playing field between retailers and suppliers, is due to launch in 2025. However, it is a stop-gap, not a solution; it aims to stabilize pricing, not bring it down. Canadians might have to wait a long time before they see any significant impact on their weekly grocery bills.

Indeed, Canadians aren’t alone in this struggle. The United States has seen similar issues, with the Federal Trade Commission investigating grocery industry practices and blocking mergers between giants like Kroger and Albertsons. Across the pond, the UK is dealing with its own food insecurity challenges, exacerbated by post-Brexit policies and delays in implementing border checks on imported goods. Meanwhile, in Australia, grocery price inquiries have led to mandatory codes of conduct in an effort to regulate the industry’s power.

Canada may not yet have the answer to this food price crisis, but the discussion is far from over. The challenges we face reflect a wider issue in an increasingly interconnected world where droughts in Spain or factory closures in the United States ripple outward, ultimately landing on our grocery store shelves. We may be seeing a slowing rate of food price inflation, but the real question remains: how long until the price tags reflect a balance between affordability and supply? And will consumers, already feeling the strain, see any real relief at all?

– Kai T.