Canadian food suppliers have sent new advisories to food retailers informing them of upcoming price increases.
The letters signal further price increases at grocery stores this fall, capping a year that has already seen nearly 10% increases in the cost of food.
In some cases, the higher prices are due to the approval by the Canadian Dairy Commission (CDC) of a second milk price increase this year. Farm gate milk prices will increase by approximately 2 cents per litre, or 2.5%, on September 1.
And now dairy processors also appear to be considering their own increases, passing on the hikes, as industry watchers had predicted.
Lactalis Canada, for example, indicated in a letter to customers that it was to implement an average national market increase of 5% in September, a rate it said takes into account the price increase of the CDC. , as well as the “significant inflationary costs” it faces.
Arla Foods Canada issued a similar notice, saying price increases for its products coming in September would reflect rising dairy ingredient costs and “inflationary impacts on transportation and packaging.”
Saputo also indicated that it would apply price increases of around 5%, depending on the category.
“Producers have had to deal with rising production costs as well as rising feed, energy and fertilizer costs, which have had a significant impact on the milk price adjustment to this year’s farm,” Saputo explained in a letter to its retail customers.
“In addition to these regulated increases, there have been unprecedented and sustained inflationary pressures affecting manufacturing, energy, labor and distribution costs throughout the supply chain. »
Concern for rural and remote communities
The price increases shared with grocers underscore how regulated dairy price increases are amplified by additional price increases throughout the supply chain, said Gary Sands, senior vice president of public policy. of the Canadian Federation of Independent Grocers.
“The timing of the increases almost seems to be on top of the regulated increases,” he said. The net effect is to further exacerbate the problem and concerns about affordability. »
These concerns are particularly acute in rural and remote communities, where transportation and fuel surcharges are higher, Sands added.
“Rising prices for these essentials are of particular concern in these communities,” he said.
The price of food purchased from stores rose 9.7% in May from a year ago, and the cost of almost everything in the grocery cart rose, Statistics Canada said last month.
A ceiling by the end of September?
Sylvain Charlebois, director of Dalhousie University’s Agri-Food Analytical Sciences Laboratory, estimated that the pace of food price increases could reach 10% before starting to slow.
“We expect food inflation to level off by the end of September,” he said. It could actually be over 10% before things start to calm down. »
The U.S. Bureau of Labor Statistics reported on Wednesday that annual inflation for food consumed at home in the United States hit 10.4% in June, showing the largest 12-month price increase for such products since 1981.
Charlebois believes Statistics Canada will release similar numbers on food inflation when it releases its Consumer Price Index data for June next week.
Soaring prices will prompt grocers to promote their private label options, he said.
“Consumers are side-trading or trading on anything and everything right now, and they’re turning to discount stores,” he observed. They are really more sensitive to the cost of living. »
Also, the letters sent by suppliers to retailers explaining the reasoning behind the cost increases are part of an effort not to be accused of “greed”, he argued.
“The last thing processors want is to become a scapegoat and be blamed for rising food inflation,” said Charlebois.
“Inflation impacts all Canadians, but it also impacts the political economy of food and how the food industry is perceived. »
Lactalis said in its letter to customers that it was “very aware of the impact of inflation on consumers”.
“As we all know, this cycle of inflation is largely driven by the latest phase of the evolution of the pandemic and by the global geopolitical situation triggered by Russia’s invasion of Ukraine and the conflict in course,” the company argued.