The letters signal more price hikes will hit grocery stores this fall in a year that has already seen nearly double-digit increases in food costs. In some cases, the higher prices are due to the Canadian Dairy Commission’s approval of a second milk price increase this year. Farmgate milk prices are expected to rise about two cents a litre, or 2.5 per cent, on September 1. But dairy companies appear to be facing increases of their own as well — the so-called “piggybacking” of price increases that industry watchers have warned will occur. In some cases, the higher prices are due to the Canadian Dairy Commission’s approval of a second milk price increase this year. (Sean Kilpatrick/The Canadian Press) Lactalis Canada, for example, said in a letter to customers that it must implement an average increase in the national market of 5% this September, a rate it said takes into account the CDC’s pricing increase, as well as “significant inflation cost” of the company. faces Arla Foods Canada issued a similar announcement, saying price increases on its products coming this September reflect higher milk ingredient costs and “inflationary impacts on transportation and packaging.” Saputo Dairy Products Canada also said it will implement price increases in the range of five per cent, depending on the category. “Producers faced increased production costs, as well as rising feed, energy and fertilizer costs, which had a significant impact on this year’s farmgate milk price adjustment,” Saputo said in a letter to its retail clients. “In addition to these regulated increases, there have been unprecedented and ongoing inflationary pressures affecting production, energy, labor and distribution costs throughout the supply chain.” Food prices have risen nearly 10 percent over the past year. (Carlos Osorio/Reuters) The price increases shared by grocers highlight how regulated dairy price increases are compounded by additional price increases throughout the supply chain, said Gary Sands, senior vice-president of public policy at the Canadian Federation of Independent Grocers. “The timing of the increases seems almost like they’re at odds with regulated increases,” he said. “The net effect is to further exacerbate the issue and concerns about affordability.” Those concerns are particularly acute in rural and remote communities, where transportation and fuel costs are higher, Sands said. “The price increase for these essential products is of particular concern to these communities.” WATCHES | Follow your food from farm to fork to see why everything is more expensive:
After the increase in the cost of food from the farm to the store
Rising costs along the supply chain and even the weather are some of the factors behind the rising food costs Canadians are seeing at the grocery store. The price of food purchased in stores rose 9.7 per cent in May compared with a year ago, as the cost of almost everything in the grocery basket climbed higher, Statistics Canada said last month. Sylvain Charlebois, professor of food distribution and policy at Dalhousie University, said the pace of food price increases could reach 10 percent before slowing. “We expect food inflation to peak between now and the end of September,” he said. “It may actually go north of 10 percent before things start to calm down.” The US Bureau of Labor Statistics said on Wednesday that the inflation rate for food consumed at home in this country reached 10.4% in June, the largest 12-month increase since 1981. Charlebois said Statistics Canada is expected to release similar food inflation data when it reports its consumer price index for June next week. Rising prices will put pressure on grocers to promote their private label options, also referred to as retail store brand, he said. “Consumers are bargaining up or down on anything and everything right now and turning to discount stores,” Charlebois said. “They’re really more sensitive about the cost of living.” Meanwhile, letters sent by suppliers to retailers outlining the reasoning behind the cost increases are part of an effort to avoid being blamed for “inflation,” he said. “The last thing processors want is to be scapegoated and blamed for higher food inflation,” Charlebois said. “Inflation affects every Canadian out there, but it also affects the political economy of food and how the food industry is perceived.” Lactalis said in its letter to clients that it is “very aware of the impact of inflation on consumers”. “As we all know, this inflation cycle is largely driven by the latest phase of the evolution of the pandemic and the global geopolitical situation triggered by Russia’s invasion of Ukraine and the ongoing conflict,” the firm said.
