Food Price Report 2015 (FPR 2015)
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Food Price Report Rapport sur les Prix Alimentaires à l2a 015 Consommation 2015 UNIVERSITY OF GUELPH UNIVERSITÉ DE GUELPH ECONOMIC BRIEF NOTE ÉCONOMIQUE Dr. Sylvain Charlebois Dr. Michael von Massow Dr. Francis Tapon Dr. Erna van Duren Dr. Paul Uys, h.c. Warren Pinto Amit Summan About the Authors LDera. dS Ayulvthaoinr, BCohaardrl Mebeomibs er, University of Guelph’s Food Institute [email protected] 519-824-4120 x56808 or 226-979-2841 ADsrs. oMciacthe aPerol fveossno rM/ Parsosfeoswseur Agrégé, School of Hospitality, Food, and Tourism Management [email protected] 519-824-4120 x56347 PDrro.f eFsrsaonr/cPirso fTesaspeounr Titulaire, Department of Economics & Finance [email protected] 519-824-4120 x52657 PDrro.f eEsrsnoar, vParonfe Dssuerueren Titulaire, School of Hospitality, Food, and Tourism Management [email protected] 519-824-4120 ext. 52100 SDern. iPora Duilr eUcytosr, Dhi.rce.c teur, University of Guelph’s Food Institute MW.aSrcr. eCna nPdiindtao te, Department of Marketing & Consumer Studies EAcmonito mSuicm Rmesaenarch Consultant Acknowledgements We would like to acknowledge the tremendous contributions by Sue-Ann Maharaj and Maggie McCormick. They have given our team great support in the preparation of this report. Prepared by the 12/02/2014 2 The Food Institute at the University of Guelph Abstract / Résumé University of Guelph’s Food Institute presents the Food Price Report 2015 (FPR 2015). 2014 realised many of the predictions made. Some categories have continued to decline over time, including dairy and eggs. We note in our predictions in respect to meat, grains, and vegetables that prices will rise in the new year. This year, we predict food prices overall will increase modestly at 0.3% to 2.4%. Table of Contents About the Authors .................................................................................................................2 Abstract / Résumé .................................................................................................................3 Food Price Report 2014: The Year Prior’s Predictions ..........................................................4 .................................................5 Figure 1: Change in Food Prices from 2004-2014 Factors Affecting Retail Food Prices .....................................................................................6 ...........................6 Table 1: Fundamental Drivers of Canadian Retail Food Prices Macroeconomic Drivers ........................................................................................................6 .............................................7 Figure 2: Crude Oil Prices (USD) from 2009 to 2014 Sector & Domestic Drivers ....................................................................................................8 Food Price Report 2015 Forecast .........................................................................................9 Method ..................................................................................................................................9 Forecast ................................................................................................................................9 .......................................................................................9 Table 2: Forecast for 2015 .............................................................10 Figure 3: Food Price Report Predictions ....................................................11 Figure 4: Meat Price Changes from 2004-2014 ...........................................12 Figure 5: CAD/USD Exchange Rate from 2009-2014 Une année 2014 marquée par la protéine ..........................................................................14 2015 : Le dollar canadien est à surveiller ...........................................................................15 Bibliography ........................................................................................................................16 Prepared by the 12/02/2014 The Food Institute at the University of Guelph 3 Food Price Report The P2r0e1d4ic: tions Year Prior’s specifically, the coronavirus PED (porcine epidemic The University of Guelph Food Price Report projected food price increases between 0.3% diarrhea) spread to vast populations of Canadian 2014 to 2.6%, higher than inflation in general. We piglets, causing short-term hikes in pork prices expected to see price increases in all food throughout barbecue season. Canadians saw these categories aside from dairy & eggs. We also hikes primarily in bacon (up 25%) ham (up 18%), predicted the prices for meats, grains, fruit, and and pork chops (up 18.2%). Although this may nuts to be relatively stable in 2014. As well, we encourage vegetarianism among consumers, predicted an increase in price of fish due to vegetable prices in 2014 may diminish those increased pressure on fisheries to catch, and thoughts, as greens took an upward turn of 3.1%. pressure from consumers and retailers for Much of this was due to historically ravaging sustainable catch. droughts California experienced in the last year, a main source of Canadian produce during the winter Overall, Canadian food prices in the last fiscal season (Mansfield, 2014). year rose 2.8%, with the greatest increases in meat and fish, 12.4% and 5.9% respectively. Table 1 Last year’s report also predicted the major shows the change in food prices over the past changes in the Canadian food retail space would decade. Constrained supply in the market has have downward impacts on prices on dairy. caused additional upward pressures on beef and Intensified competition arose with the introduction of pork prices. Real cattle prices are at its highest Target and Dollarama whilst acquisitions of since the early 1980s, and hog prices at its highest Shopper’s Drug Mart and Canada Safeway, since the mid-1990s. This trend of soaring meat encouraged loss leadership on goods such as prices comes due to increase slaughter fees in cheese, milk, and pasta to stimulate greater sales cattle from 2012 (Honey, 2012) and more recent on other items in stores. As correctly forecasted, the incidents in porcine diseases that reduced supply in CPI for dairy and eggs only saw a 0.6% increase in global hog markets (Campbell & Chen, 2014). More price in 2014. Prepared by the 12/02/2014 4 The Food Institute at the University of Guelph CFighuaren 1g: e in From Food Prices 2004-2014 Prepared by the 12/02/2014 The Food Institute at the University of Guelph 5 Factors Affecting Retail Food Prices The main drivers in three fundamental domains are expected to influence retail food prices in 2015. Table 1 outlines the impact, effect, and likelihood of these drivers on prices in our food price forecast for the upcoming fiscal year. Table 1: Fundamental Drivers of Canadian Retail Food Prices Drivers Impacts Price Effects Likelihood Increasing Significantly Variable Likely Weather Moderate Upward Unlikely Macro Geopolitical Risk Significant Slightly Downward Likely Input Costs Moderate Downward Likely Energy Costs Currencies & Trade Very Significant Upward Very Unlikely Environment Food Retail & Moderate Slightly Downward Likely Sector Distribution Landscape Food Processing Slightly Moderate Downward Likely Industry Moderate Policy Context Moderating Unlikely Significant & Growing Increased Dispersion Likely Consumer Awareness Consumer Debt & Slightly Moderate Slightly Downward Unlikely Domestic Deleveraging Minimal Negligible Likely Inflation Consumer Income & Moderate Slightly Downward Likely Income Distribution Macro Drivers Changes in weather and climate are expected to have significant implications for food markets in the long term. As droughts have been increasing in recent years, the impact of climate conditions and catastrophic weather events increasingly creates upward pressures on food prices. Such impacts pose significant challenges in global agriculture, posing threats to the Canadian wallet. A significant proportion of Canadian food is imported, and events as the droughts in California and Brazil affect domestic retail prices of imported fruit and coffee, respectively. Conversely, dry weather in southeast Asia has increased prices for cooking oils, such as palm oil (Indonesia Investments, 2014). Despite weather as a strong upward driver of food price, forecasting short-term impacts for 2015 is extremely difficult. Prepared by the 12/02/2014 6 The Food Institute at the University of Guelph Geopolitical risk may affect food prices through economic instability in South America and Eastern Europe and Russia (Sonne & Troianovski, 2014). However, the structure of the Canadian food sector limits the impact of these events, and this risk will affect prices only moderately at the consumer level. Input costs and energy costs may drop due to evident declines in oil prices, with negative pressures on food prices (Baumeister & Kilian, 2013). Figure 2 shows the change in oil prices from 2009 to 2014. CFigruured 2e: Oil Prices (USD) From 2009 to 2014 The end of the American-Canadian dollar parity occurred during 2014, with the Canadian dollar currently trading below 90 cents on the greenback toward year-end. These effects will continue to have upward pressure on produce prices on the horizon since produce import levels tend to increase in the winter and spring. Prepared by the 12/02/2014 The Food Institute at the University of Guelph 7 Sector & Domestic Drivers The food retail and distribution landscape in 2014 saw significant change, with the major retail acquisitions of Shopper’s Drug