Food and beverage

If you have strolled up and down the produce aisle of the grocery store over the past year, chances are you’ve noticed that getting your 7-10 servings of fruits and vegetables is taking a bigger bite out of your food budget. In fact, Statistics Canada reports that fresh vegetable prices are up a whopping 17% since May 2018! Consumers and food and beverage professionals alike are feeling the pinch. As the fall harvests are wrapping up and many of us are preparing for our annual hibernation, we look at why the cost of fruits and vegetables has risen so dramatically, and why it doesn’t look like that’s going to change in the short term.

Mother nature hasn’t been kind

With climate change comes increasingly unpredictable weather as confirmed by a recent Intergovernmental Panel on Climate Change. It noted that global agriculture remains highly vulnerable to changing weather patterns.[1] Previously drought-ridden California saw below average temperatures and above average rainfall in the winter of 2019 and unusually soggy conditions persisted throughout the spring in Eastern Canada. In both cases, planting was delayed resulting in smaller crops and reduced supply. Not good news when you consider that Canada continues to be California’s second largest export partner (US$3.8 billion on agricultural products and food manufacturers alone[2]), relying heavily on the state to supply fruits and vegetables particularly in our winter months.

Trade uncertainty

Love him or hate him, President Trump and his administration have stirred up trade wars that have negatively impacted Canadians. At the time of writing, the United States has imposed 25% tariffs on more than US$550 billion worth of products imported from China.[3] Since many products Canada imports from China come through the United States, the tariffs are already tacked on when they arrive at the Canada/U.S. border. Meaning that the beans, broccoli, bananas, pineapples, to name but a few, that we import from China will cost us at least 25% more as long as this tariff remains in place.

Canada is also feeling the impact of the crackdown at the U.S./Mexico border. The trade war with Mexico, coupled with border delays due to tougher immigration policies have not only made products more expensive, they have significantly slowed down the flow of goods from south to north, with some not making it up here at all. Our reliance on fruits and vegetables from Latin America means consumers and food retailers need to get used to higher costs and reduced supply.

Just how much has weather and trade increased prices?

Carrots – 30%

Apples 22%

Onions – 20%

Tomatoes – 14%

(May 2019 compared to May 2018 – StatCan/HuffPost Canada)

Obviously, these price jumps have not gone unnoticed. Many Canadian food importers are having to find new overseas suppliers, both a time-consuming and expensive process. Major grocery store chains have had to raise prices to offset the increased costs. Consumers have been faced with tough choices at the grocery store, either taking the financial hit or bringing less healthy options home to their families.

Where’s the beef-less burger?

The demand for plant-based protein alternatives has been one of the most popular trends in recent years in the Food and Beverage Industry. Attributed in part to the most recent Canada Food Guide recommendations which included a focus on decreasing meat consumption and replacing it with plant-based proteins. Whether or not it was a catalyst for changing consumer eating habits, recent studies show that 32.2% of Canadians are considering reducing their meat consumption to a certain degree within the next six months and 6.4 million Canadians already follow a diet that either restricts meat or eliminates it.[4] When you combine increased demand for vegetables to satisfy the plant-based protein market, weather-related crop shortages, and tariffs, it’s no wonder we’ve seen prices rise.

Wholesalers and processors are feeling the squeeze

Lorenzo Scala, President of Tomato King, an independently owned and operated wholesale fresh fruit and vegetable distribution company in Ontario, indicated that their average unit cost is up 25% in the last year. Scala confirmed that weather has had a big impact, with several regions they rely heavily on for product (e.g. California and Mexico) suffering from calamitous weather. This has had a negative effect on the growing season and caused significant crop damage. The end result, says Scala, is that they are paying a premium to get product.

“As an importer, we’re paying more to bring the product home which is impacting the retailers,” Lorenzo Scala, President of Tomato King.

It’s not just the weather, new U.S. trade regulations have also impacted their business. Scala pointed out that the new regulations are preventing their trucks from crossing borders efficiently creating considerable delays both at the U.S./Mexico border and entering Canada. These slowdowns mean drivers are on the road longer which increases transportation costs, delays the product getting to market, and increases the price they have to charge retail stores.

Food processors aren’t faring much better with Ontario analysts forecasting uneven profits for the industry in 2019.[5] They have been particularly affected by reduced local supply forcing a 31% increase in imports from January to April of this year over the same period last year.[6]  Small plant scale and a short pack season leads to high fixed processing costs leaving margins tight, even in good times.

Fluke or long-term trend?

The confluence of events that has led this country to see above average increases in the cost of fruits and vegetables could potentially be explained away as an anomaly. Trade relations could improve over time, however; experts predict the impact of climate change alone will result in greater food scarcity in the future. So, the ongoing trend of reduced supply and higher demand means getting your greens doesn’t look like it’s going to get cheaper anytime soon.

 

[1] Canada Food Price Report 2019.

[2] https://advocacy.calchamber.com/international/portals/canada/

[3] https://www.reuters.com/article/us-usa-trade-china-timeline/timeline-key-dates-in-the-u-s-china-trade-war-idUSKCN1UZ24U

[4] Charlebois, Sylvain, et al. Plant-based dieting and meat: Protein wars and the changing Canadian Consumer. Dalhousie University. 2018.

[5] Ontario Processing Vegetables – An Economic Analysis.

[6] Canadian Food Processing Outlook, August 6, 2019.