A weaker dollar and price spikes are creating the illusion of rising food prices. Here’s why the perception is wrong.
Have you been to the supermarket lately? Have you seen the price of meat? What planet are you on?’
So went emails from readers responding to a recent column on the great inflation disappearing act. For the past five years many of the world’s central banks have been printing money by the truckload to prop up their economies and we should be drowning in a sea of inflation.
But we aren’t. In some European countries prices are falling. In Canada, where we didn’t turn on the tap, it’s running at a red hot annual pace of 2 per cent. But several readers wondered where I buy my food. Did I turn on the barbeque this summer? Steaks, ribs, hamburger, bacon, pork chops, chicken all cost a fortune. Who’s kidding who? Of course prices are up.
“Vanishing inflation? I guess you don’t go grocery shopping very often,” wrote one commenter on that article. “Couple these inflation numbers with the downsizing in packaging and virtually zero-growth in wages and the average Canadian is feeling quite a pinch.”
Added P.G. in an email: “I do not understand [the] reports that keep saying inflation is only 2 per cent. The price of meat and poultry has gone up by 100 per cent in the last four years, 25 per cent per year. Vegetables and rice keep going up on a monthly basis. Consumers do not notice because the packages have become smaller and the prices have gone up.”
But is that true? Food inflation may be what people are perceiving, but are things really that bad? The answer is no. The cost of weekly basket of groceries is not going up by much. Food prices year-over-year are up 2 per cent, with the price of meat and pork rising a lot, but that’s offset by declines in such things as coffee and tea, baked goods and cereals. Milk, yoghurt and butter have been flat, so when inflation is taken into account, they also cost less.
And even though our dollar is worth about 10 per cent less in U.S. dollar terms, prices aren’t expected to move much as a result. The price of fruit and vegetables has gone up gradually with the dollar’s decline and as winter sets in, we’ll feel seasonal increases. But the competition among Ontario grocers is fierce.
“People have been saying forever that the cost of food is going up, even when it isn’t,” says Kevin Grier, a Guelph-based food industry analyst. “It’s a fascinating thing.”
Grier says competition among the big players is working to our advantage. There’s Loblaw, Metro and Sobeys, plus their discount brands (No Frills, Food Basics and FreshCo), plus Costco. Add in a growing presence by WalMart and Target.
Grier says beef prices are 10 to 15 per cent higher than a year ago, but that will moderate. A decades long decline in demand, collided with a drought in the U.S. west, which increased the cost of feed. Farmers reduced the size of herds and prices rose. The drought has eased, grain harvests have improved, but herds need time to rebuild.
Pork prices hit a record this summer when a disease killed piglets, meaning fewer mature hogs now. Chicken prices have risen, says Grier, “not because of short supply, but because they can.”
We tend to notice the price of meat because we buy it frequently. We don’t notice if staples are up or down, because we buy them less often.
“The prices in the centre of the store are the same as a year ago, or less,” he said. “Quaker Oats and Heinz ketchup aren’t going up.”
Avery Sheinfeld, CIBC’s chief economist, says the other thing people don’t notice when they focus on a rise in one component of inflation such as food, is that prices in others may be falling. As examples, the cost of manufactured goods, consumer electronics and clothes, as examples, are falling. These are global businesses with plenty of competition.
You’re still paying the same $500 for a TV as you did 30 years ago. But you get a lot more for a lot less today. Today’s $500 is worth $207 in 1984 dollars, but still gets you a 50 inch set.
Shenfeld says dairy products are up less than 1 per cent this year, while the price of breads and grains has fallen 1.6 per cent.
But meat, there’s no getting around it.
“If you’re a vegetarian, you’ve been okay,” he says.
My Fortinos had a great sale on sirloin steaks recently — $7.99 a pound. I bought half a dozen and fired up the barbecue this weekend. Who cares if it’s snowing.