Rising Food Prices: U of G Economists Predict Some Relief in 2012

December 12, 2011 - News Release

Canadians will get a small break at the supermarket in 2012 because food prices will increase only marginally in the coming year, according to a forecast by two University of Guelph professors.

But they predict that unstable economic conditions will continue to affect the food industry, with restaurants, food banks and specialty industries looking for ways to reduce waste and improve sustainability.

“The last few years have been challenging for Canadians with less means,” said Prof. Sylvain Charlebois, associate dean of research and graduate studies in Guelph’s College of Management and Economics. He wrote the 2012 Food Price Index forecast with U of G economics professor Francis Tapon. “Expected food price relief may come as good news for these families in 2012.”

The Food Price Index has received significant national media attention, with articles appearing in the Globe and Mail, Toronto Star, Winnipeg Free Press and Canadian Business magazine, among others. Reports aired on Global TV and CTV, and the story was picked up by the Reuters news agency.

The economists predict that general food prices will increase by no more than two per cent on average. They expect an increase in meat prices of about three per cent; fresh vegetables, one to three per cent; baked goods, three per cent; and restaurant meals, two per cent.

The anticipated price increases are much more modest than those experienced this year. In 2011, dairy prices went up 4 per cent; egg prices 11 per cent; fresh vegetables, 10 per cent; baked goods, seven per cent; fresh fruit, six per cent; and meat, five per cent.

The U of G professors had predicted an overall increase of five to seven per cent for this past year.

“We saw significant increases in retail prices, primarily because input prices went up significantly," said Tapon. “For 2012, it’s expected that input prices won’t have as much of an impact as they did in 2011.”

The researchers expect that competition in Canadian food retailing — specifically the arrival in Canada of Target stores — will help keep down food prices next year.

Charlebois said retail price hikes over the past year "have induced Canadians to rethink their attitude towards food in general.”

Consumers have been buying foods more tactically, eating out less and limiting purchases of premium food products such as organically grown and fair trade. This pattern is expected to continue in 2012.

The economists base their predictions on factors that include climate, economic risks, energy costs, currencies and trade, and Canada’s food distribution and retail landscape. They also consider domestic fundamentals such as consumer debt and inflation.

Of these, the economy and climate are the most concerning.

“We cannot remember a period with so much uncertainty in economic outlook and no obvious easy way out,” said Tapon. “Food prices will reflect this uncertainty.”

For example, European financial instability will continue to affect both retail food prices in Canada and import prices for Canadian food importers.

Climate is the most unpredictable economic driver of food prices.

“It’s an important factor,” said Charlebois, an expert in food distribution and safety. “Every year, the global agricultural economy witnesses the impact of climate change. Productivity and yields are affected by weather constantly, whether regional or beyond.”


Prof. Sylvain Charlebois
College of Management and Economics
519-824-4120, Ext. 56808

Prof. Francis Tapon
Department of Economics
519-824-4120, Ext. 52657

For media questions, contact Communications and Public Affairs: Lori Bona Hunt, 519-824-4120, Ext. 53338, or lhunt@uoguelph.ca, or Shiona Mackenzie, Ext. 56982, or shiona@uoguelph.ca.

University of Guelph
50 Stone Road East
Guelph, Ontario, N1G 2W1