Food inflation is driven less by climate change and more by interprovincial trade barriers, taxes and regulatory costs
Key takeaways
- Canada now has the highest food inflation rate in the G7.
- Food prices in key categories such as meat and nuts have risen five to seven per cent year over year, while U.S. food inflation is significantly lower.
- Even if inflation slows down, prices are not going back to what they were. They are just rising more slowly.
- Rising food prices are less about climate change and more about ongoing costs and government policies.
- Until those issues are addressed, you should expect your grocery bills to remain high.
What’s this?
With Tuesday’s release of new data from Statistics Canada, the conclusion is unequivocal: for the second consecutive month, Canada is posting the highest food inflation rate among G7 countries. Food inflation now stands at 7.3 per cent.
Beef, nuts, pork and even chicken are between five per cent and seven per cent more expensive than a year ago. The only relief comes from eggs and fresh fruit, which are cheaper on a year-over-year basis.
Meanwhile, the United States, despite pursuing an aggressive tariff policy affecting numerous imported goods, is reporting food inflation of 2.9 per cent, less than half of Canada’s rate.
Admittedly, one year ago, Canada was benefiting from a temporary GST holiday, which artificially suppressed the index. However, even after adjusting for that statistical distortion, Dalhousie University’s Agri-Food Analytics Lab estimates suggest Canada’s food inflation would still have been approximately 6.3 per cent, keeping it at the top of the G7.
Yet as recently as last week, some federal ministers attributed rising food prices primarily to climate change. That explanation is becoming overly convenient. Yes, climate conditions influence certain agricultural prices. But for several years now, they have not been the primary driver of Canada’s food inflation.
The issue is structural.
Since 2008, the food component of the Consumer Price Index has consistently grown faster than the overall CPI. This tells us that the challenge is neither cyclical nor temporary. It reflects deeper issues of productivity, competitiveness and the structural configuration of our agri-food economy.
Several factors contribute to this dynamic:
- Interprovincial trade barriers, including aspects of supply management where quota administration is provincially governed;
- Multiple layers of taxation affecting the food chain, including industrial carbon pricing;
- Fragile logistics systems at the port, rail and trucking levels;
- Aging infrastructure;
- A generally smaller and less diversified business ecosystem compared to our global competitors, limiting sourcing flexibility;
- A complex and costly regulatory environment, including labelling requirements and administrative compliance burdens.
Temporary measures have also played a role. Counter-tariffs and the GST holiday introduced additional distortions, whether through opportunistic price adjustments or the need for firms to absorb policy-induced costs. These effects may not be visible to consumers, but they are economically predictable.
Individually, each factor may appear marginal. Collectively, however, they systematically increase the cost of doing business in Canada, and those costs inevitably flow through to consumers.
In this context, the enhanced GST credit, valued at nearly $14 billion and already built into the federal budget, adds further demand-side pressure. Politically, it is difficult to oppose direct support for vulnerable households. Economically, however, any significant fiscal expansion not accompanied by productivity gains carries inflationary consequences.
Food inflation may decelerate in February. But a slowdown in inflation does not mean falling prices. It simply means prices are rising more slowly.
Until we acknowledge that Canada’s food affordability challenge is fundamentally a productivity and competitiveness problem, we will continue treating symptoms rather than causes and repeating the same policy mistakes.
Dr. Sylvain Charlebois is a Canadian professor and researcher in food distribution and policy. He is senior director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor Podcast. He is frequently cited in the media for his insights on food prices, agricultural trends, and the global food supply chain.
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