What are the newest food inflation numbers telling us?
Statistics Canada released the food price index for March 2022 and the news is much as we would have expected. Year over year food prices have increased by 7.7% with food bought in retail increasing 8.7%. These numbers are high and significant but it is important to look at them in a little more detail to get a more accurate and nuanced understanding of what is happening.
Things are still getting more expensive
The year over year numbers can sometimes be misleading. If there is a big price jump in October, for example, March numbers will continue to reflect it when comparing to March of last year, but there may not be any ongoing price increases. The jump still matters but it may overstate the actual changes consumers are seeing in the stores today.
In this case, however, there is still a 1% increase in prices from February 2022 to March 2022. That means things are still going up. One percent doesn't sound like much but if you put that across a year it is a 12% inflation rate. We aren't seeing it ease yet.
Not everything is getting more expensive
If you read the inflation number for meat you will see a 10.5% increase year over year. If you look just at the last month, however, prices are down almost 1% with pork down 3.1% and beef down 1.7%. It may be that we are seeing some price relief on these meat products relative to short term price increases but prices are still higher than they were a year ago.
The price relief may not last. Feed prices continue to be high and there continues to be dry areas in western North American which could put more supply pressure on these products and lead to further price increases going forward. We also often see price increases for beef in the summer months as demand goes up as we like beef on the BBQ.
We are likely seeing the Impact of the Russian Invasion of Ukraine
There are many factors affecting price inflation. In fact these very high levels of food inflation are being driven by several factors. This makes it difficult to highlight the contribution of specific factors. We can, however, see some indications or the impact of the conflict in Ukraine.
If we look at products with wheat in them, bread and other bakery products, their prices are increasing at a faster rate than other food products. Bread is up 3.5% in March relative to February.
There will be additional impacts on food downstream as the impact of fertilizer and fuel price increases work their way through the system.
Dairy is increasing as expected
The prices of dairy products and eggs are up about 8.5% year over year which is in line with the 8.9% for retail food prices. We expected to see a price increase in this segment as farm prices were increased in February which should lead to increases in retail prices as the more expensive milk is processed into fluid milk, cheese, yogurt, and butter. The 2.9% price increase from February to March is indicative that this is happening. It will be worth watching to see if there is an additional increase in the April numbers as the farm gate price increased by 8.4%.
It is worth taking a deeper look at the numbers to get more meaningful insight.
Recommended citation format: von Massow, Michael. "What are the Newest Food Inflation Numbers Telling Us?". Food Focus Guelph (127), Department of Food, Agricultural and Resource Economics, University of Guelph, April 20, 2022.