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 :/
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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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.
In what way?
Frankly, the grocery industry is one of the least idiosyncratic markets around.