Contributed by Robert Lyman © 2022. Robert Lyman’s bio can be read here.
In April 2022, Canadian consumer prices rose 6.8% year over year. The increased cost of living was largely driven by food and shelter prices, although fuel prices were also significant factors. Food prices rose by almost 10 percent during the period, the largest increase in 41 years.
According to the 2022 Food Price Report prepared by Canadian universities, a typical grocery bill rose by 70 percent between 2000 and 2020. Worse still, between 2015 and 2019 the national average food expenditure increased by 16.3 percent, while median income only increased by 6.6 percent; Canadians are paying a higher portion of their incomes for food.
The list of things that are causing these increases is a long one.
In 2021, Canada’s food supply chain experienced logistical disruptions due to the COVID-19 pandemic and the restrictions imposed by governments in response to it, such as mandated lockdowns and stay-at-home orders. The food supply chain was affected by blockages and delays in transportation, especially in maritime transport as congestion of cargo ships occurred at Canadian and U.S. ports. There was reduced trucking capacity for moving goods out of the ports. In addition to the supply chain problems, the sharply rising crude oil and refined product prices increased the costs of transport, not all of which have yet been passed through to final consumers.
The United Nations Food and Agriculture Organization (FAO) has documented similar trends worldwide. Food prices were rising before Russia’s invasion of Ukraine, due to strong demand for food and animal feed, poor weather in key supplier countries, increasing costs of energy and fertilizers, and export restrictions imposed by several countries. Prices for fertilizers, especially for nitrogen and phosphorous fertilizers, rose by more than three times in 2021, due to increases in the price of natural gas. Agriculture generally absorbs high amounts of energy, both directly and indirectly, through use of fuel, gas and electricity, as well as agrichemicals such as pesticides, lubricants and fertilizers.
The war in Ukraine has made matters worse. The Russian Federation is a major exporter of coal, oil and gas, so sanctions that disrupt these exports tend to increase prices further, especially in Europe. Russia and Ukraine are also major exporters of wheat and other cereal products, and these are being impaired by the war.
The rising food costs are painful for Canadians, especially those with low incomes, but they will be dire for many people living in developing countries. The UN estimates that the global food import bill will hit a new record of U.S. $1.8 trillion this year, U.S. $51 billion more than in 2021. The poorest countries will find it difficult to finance the payment of these costs.
Much of the increased energy costs was due to the disparity between the growing global demand for hydrocarbons and western governments’ and financial organizations’ efforts to discourage investment in hydrocarbons exploration and production. Government policies that mandate the use of agricultural feedstocks for biofuels like ethanol, politically popular with farmers, also have increased food production costs.
One wonders. Will we starve the poor to “save the planet”?