Friday, July 8, 2016

Food price inflation is cooling

Food prices are beginning to plateau, says market analyst Kevin Grier, after several years of significant increases.

He said two things drive food prices – farm-gate prices and supermarket competition.

Farm-gate prices have been either in decline or have are steady, indicating little reason for further retail price increases for that reason.

And Grier says supermarket competition is beginning to heat up.

Looking back, Grier says the decline in the value of the Canadian dollar drove farm-gate prices higher. The dollar has now stabilized.

He says supermarket competition tends to heat up when extra floor space comes into the market, and that’s what happened in 2014 when Target entered the Canadian market.

But when it closed, square footage went down and competition eased. Now square footage is again on the increase.

Since the George Morris Centre folded, Grier has set up Grier Market Analysis and Consulting and for this report and some others, he works as an associate with Agri-Food Economic Systems headed by Al Mussel, formerly chief economist for the George Morris Centre.