Consumers should prepare for an inflationary shock at the grocery store. The food price increases seen so far are just a small glimpse of what is to come.
Unless there is substantial and rapid government assistance, households will not benefit this summer from the inflationary respite typically represented by local products, on the contrary. And the situation is worse in remote areas where transportation costs will further increase the bill.
Players in the agricultural community consulted in recent days by The Canadian Press are united: producers are struggling in a perfect storm when almost all of their production costs have exploded. And some of them believe that beyond prices, the whole issue of food security or sovereignty is in danger of being questioned in the medium and long term.
There are definitely food price increases, that’s for sure, admitted from the beginning the president of the Union of agricultural producers, Martin Caron. of some? He couldn’t say, but it would be important.
Fuels
All farm machinery runs on diesel, and although fuel for agricultural production may be cheaper than that sold at retail for transportation, its price has more than doubled compared to last year. In the spring of 2021, agricultural diesel will be sold for just under $ 1.00 per liter. It then rose during the year to reach the average price of $ 1.26 in 2021. Following the outbreak of war in Ukraine, this price jumped to reach $ 2.05 per liter on Thursday.
He himself is a producer of dairy and grain, Martin Caron said diesel is worth him about $ 14,000 for the season and I have a standard farm. This year, it will cost me about $ 10,000 more, minimally. An increase, therefore, of 71%.
Many producers also rely on various operations – seeding, fertilization – to subcontractors, usually paid by the time, but they are now adding a fuel surchargehence another source of inflation.
These surcharges are also added on the side of carriers delivering their need and, on the side of fruits and vegetables, Bringing fresh produce to major centers still requires trucks that are, usually, owned by producers.added Patrice Léger Bourgouin, General Manager of the Association of Vegetable Producers of Quebec (APMQ).
Fertilizers
Producers here buy their nitrogen fertilizers almost exclusively from Russia. The war in Ukraine thus exacerbated the current problem of overheated prices for fertilizers, as Canadian sanctions imposed a 35% surcharge on Russian fertilizers. Nitrogen fertilizer sold at $ 630 a tonne last year now costs more than $ 1,500 a tonne, almost triple that.
The president of Producteurs de grains du Québec (PGQ), Christian Overbeek, pointed out that even before this heavy tax there has been an appreciation of the value of fertilizers for various considerations such as increasing energy prices. Also, some industries have stopped doing it because it is too expensive for them to do so. They stopped their facilities. This created a rarity.
Since producers ordered their fertilizer in the summer and fall of 2021, a massive unexpected overload was added. We experienced inflation throughout 2021 and there, for fertilizers and fuel, the war brought new increases.Mr. explained. Overbeek.
Daniel Gobeil, president of Producteurs de lait du Québec (PLQ), said last year’s droughts in South America and flooding in western North America pushed up grain prices. There are many stages of climate change that have caused the extreme heat of grain pricesa commodity that trades on the Chicago Stock Exchange and is therefore very sensitive to changes in supply and demand.
The domino effect of grains on meat and milk
One of the important uses of grain is to feed animals. For animal production, for about 12 months, we have been talking a lot about feeding costs, especially the increasing cost of grain, Mr. Gobeil explained. With the rising price of fertilizers and fuels, it is still contributing to the rise of cereals, so surely for us, we are experiencing an increase every month and we still don’t know now when these price increases will stop..
Clearly, therefore, further increases in the value of meat are expected, and when it comes to milk – and by extension, dairy products – last February’s record 8.4% increase is certainly pale following the coming . The milk market is governed by a supply management system. Each February, the asking price is adjusted based on an analysis of production costs for the previous year ending in October.
However, the prices of fertilizers and fuels will rise further after October 2021. So consumers should expect massive increases in the price of dairy products by February 2023, unless the federal government and the Canadian Dairy The Commission agreed to the demands of producers. They are calling for a more responsive pricing system with a second annual adjustment, possibly in August. But for the consumer, it only means that he will answer the first part of the increase by the end of summer 2022 and another part in February 2023.
This formula should be adjusted at least twice a year, because for farms, the reaction time is too long. We should not go to disastrous decisions with companiesargument of Mr. Gobeil.
Finally, since we are talking about animal production, we should not forget bird flu, which is very expensive for poultry and egg producers and another source of inflation.
Labor costs
There are several reasons to rejoice in the increase of the minimum wage, an income that is almost not enough to survive, but this increase will also be passed on to the consumer, as its impact is significant on the market gardening, horticultural and berry side.
Martin Caron points out that a study ofUPA showed that the most important cost in these sectors is labor. This is 50% of the value of a strawberry. Whenever wages increase, it automatically has a huge impact on the cost of food.
In addition, in the context of labor shortages, many producers are well aware that they need to offer more than the minimum wage.
Interest rates and deficits
And if not all is enough, the recent rise in interest rates is hurting producers who have to pay more than expected for their inputs. We are running out of money in our agricultural businesses, so our people are looking to raise their lines of credit, but at higher ratesrevealed by Martin Caron.
Except there whenever interest rates rise by 0.5% at the agricultural level, $ 200 million is withdrawn from the margins of agricultural producers. This is very worrying to people because we are talking about 1.5% increases to come. And that would mean there would be $ 600 million less in revenue in Quebec agriculture in general.he warned.
In addition, the weakness of supply chains increases headaches, especially on the fresh produce side. Patrice Léger Bourquoin reports that there is a shortage of food wrappers used in packing broccoli or asparagus, for example. These rubber bands are from China and orders do not arrive due to COVID. Also, no boxes. I shouldn’t have any problems storing the boxes. Corrugated board production in North America is still relatively significant. But the explosion of online commerce means that there are currently more requests for boxes than the supply can afford and that’s also where we have to pay more..
The state to the rescue of the consumer?
We wouldn’t be surprised to hear producers asking for state help. They do this for years, for all sorts of reasons often associated with the vagaries of the weather. But even if you leave the explosion in costs, it will be hard to prove them wrong. The latest report Agricultural policies: monitoring and evaluation from the Organization for Economic Co-operation and Development (OECD), published in 2021, shows that since the late 1980s, Canada has dramatically reduced agricultural support. This support was split between 1988 and 2002 and split again between 2002 and 2020, and now accounts for 9% of total farm receipts-about half the average OECD. In other words, Canada gives its producers half the average for the countries ofOECD.
Maybe we want to be efficient, productive, all of that has its limits, the UPA president said. If we want to remain competitive, we must have agricultural support at the same level as others. In the United States, they receive twice as much support as in Canada and they receive even more in Europe.
It is really important that we have support if we want to sustain our agriculture. When the pandemic came, Ms. [la ministre fédérale de l’Agriculture, Marie-Claude] Bibeau and M. [le premier ministre du Québec, François] Legault said: we will not abandon our people. We will have funds to support. So we hope to have assistance programs for producers that will probably affect the price for consumers less..
Without government assistance, consumers will surely experience a huge increase, as producers will not go bankrupt. On the other hand, consumer purchasing power still has limitations, says Daniel Gobeil. The Canadian government should come to help the sector and limit inflation for consumers.
Food Safety
What if any increase causes them to lose their competitiveness against growers in the southern United States, Mexico, or other hot countries that grow year -round with lower labor costs and environmental regulations? more loosely, the entire industry could be put at risk, says Martin Caron. We are talking about biofood policy in Quebec. At the federal level, we are also talking about agriculture, but there is another step that needs to be taken. Autonomy is in question and the sustainability of agriculture is in question.
I’m worried because this year, there’s a pretty dark atmosphere, says Patrice Léger Bourgouin. These days, I have at least a member or two who calls me a week saying: if it’s a time as hard as last year, I might think of doing something else..
Source: Radio-Canada
