The Bad, The Good, and the Interesting: Reflecting on Parliament's Report on Food Affordability
The Parliamentary Report on Food Affordability came out after the Standing Committee on Agriculture and Agri-Food held hearings earlier in 2023. The high profile hearings were watched intently as grocery CEO's were grilled about high prices and record profits. Jagmeet Singh (the leader of the federal NDP) even made an appearance where he dramatically showed letters from Canadians and asked breathlessly: "how much is too much?" There were several other witnesses who provided perspectives that laid the foundation for this report. Now that the report has been released, we can assess whether we learned anything and if anything of value came out of the hearings. The truth is that, while there are some good things in the report, this is little that is surprising or new, and several opportunities were missed. The following reflects some thoughts on the report. A perspective on the competition bureau report will follow shortly.
There was significant discussion at the hearings on "greedflation," the term coined to suggest grocers were profiting by raising prices leading to price inflation. Despite grilling grocery CEO's (and previously their CFO's), the committee could not conclude that grocers were driving inflation (although they left themselves some wiggle room if the Competition Bureau finds evidence of wrongdoing). I had suggested that it was unlikely they would find anything so it was hardly surprising. The report does talk about how much inflatMy bigger complaint that a report on food affordability in Canada didn't spend any time at all talking about what might be driving food prices up. This is an opportunity missed. The focus on grocers meant that Canadians are no closer to understanding what is really driving food prices upward. That does a disservice to Canadians.
The committee did talk about food insecurity which is important. They even made recommendations on supporting food rescue to help alleviate food insecurity. While short term food insecurity can be helped by food banks (supplied by food rescue), it doesn't deal with the fundamental problems of food rescue. Some approaches to food waste reduction could contribute to food price reductions (by increasing supply/availability of food) but food rescue is not one of them. Don't get me wrong, food rescue is excellent but the fact that this was the only solution to food insecurity this committee could come up with is surprising. Long term food insecurity is a function of income in Canada. There is lots of food available. Its disappointing that the committee didn't address this at all in a discussion of food affordability. It is worth noting that Canada spends, on average, near the lowest proportion of salary on food. The lowest income Canadians struggle with food insecurity and a report on food affordability was completely silent on this.
I already spoke about the discussion of food insecurity and the support for food rescue. While a narrow focus, this is good.
The committee highlighted the public misunderstanding of best before dates. Ending the practice of best before dates will reduce food waste. Best before dates are not expiry dates. They are an indication of optimal freshness but not safety. It may also bring down food prices to a small degree. Its not going to make a huge difference in food affordability but is a good thing to do.
The report also suggests investments in both supply chain infrastructure and innovation in the food system. Supply chains have been a constraint. Its relates not only to infrastructure but also to labour - there is the threat of a strike at the port of Vancouver and there is an ongoing shortage of truck drivers across North America. A more dependable supply chain would be positive for food prices. Product and process innovation across the supply chain would also be positive for food prices but these sorts of investments have long term benefits and will not provide an immediate relief to Canadians facing high prices.
There were a few things in the report which were surprising and didn't feel relevant to food affordability. The first relates to a recommendation that if the Competition Bureau finds excess profits, that the Government of Canada institute a windfall profits tax. This is problematic from a couple of perspectives. If the Competition Bureau finds that there is anti-competitive behaviour they should probably charge these companies. The idea of windfall profits taxes is impractical and poorly defined. If the retailers did something wrong, leveraged their market power to increase price, or colluded between themselves to set prices then they should be punished.
What are windfall profits? Where is the dividing line between acceptable and unacceptable profits? Does it differ by industry? Banks and teleco's are concentrated too. Petroleum companies are making record profits with high oil prices and high gas prices at the pumps. This approach is simply not viable. And unless you tax it all away, are you really reducing the incentive?
The committee also recommended tracking prices at different stages of the supply chain to better understand where price increases are coming from. This is a good idea. It might not improve food affordability but it will help us understand the drivers of inflation better.
The committee recommended repaying farmers and others who have paid the 35% tariff on Russian fertilizer and to discontinue this tariff. Farmers are price takers so lowering costs by reducing fertilizer costs will help farmer incomes but do nothing for food affordability. I would say the same thing about helping producers with cash flow issues due to higher input costs. This may well be a good thing to do but it won't make food more affordable.
Reciprocity of standards reflects the principle that imported goods meet the same standards that domestic goods do. This makes sense from a food safety, environmental impact and competitiveness perspective. The committee recommended doing this and increasing inspections to ensure that standards are met. This could explicitly raise food prices in Canada. It might be a good thing to do but shouldn't be hidden in a report on affordability without context about the impact.
The Competition Bureau is hampered by limits on what it can ask for (see next blog post). The committee recommended that the Bureau be given more power to ask for information. This is a good thing and may help us to understand potential anti-competitive behaviour by retailers and others.
The last interesting point from the committee is the recommendation to make unit pricing a consistent requirement across the country. Many retailers offer unit pricing but in very small font. Once again, providing more information to those that want it in a manner that is consistent and clearly visible is a good thing. It will allow Canadians to identify cheaper options. It does not mean they will change their purchases. They have to be willing to switch. Helping consumers make better choices is a good thing. Its not clear that putting unit prices will change overall prices - in fact, I doubt it will - but it may change the relative proportion of products purchased.
Keywords: food, food price, prices, affordability, inflation, food inflation, retail, grocery, supermarket, policy
Recommended citation format: von Massow, M. "The Bad, The Good, and the Interesting: Reflecting on Parliaments Report on Food Affordability". Food Focus Guelph (134), Department of Food, Agricultural and Resource Economics, University of Guelph, June 12, 2023.