Any way you slice it, food prices are going up

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Liz MacKay is bracing herself for a much higher grocery bill in the coming months. The Prince Edward Island mother of four knows that the prices of everything from bread to fresh vegetables and meat are going to climb as food companies and grocery chains begin passing on soaring commodity prices to consumers.

"They keep warning us that starting this month and in April [food prices will]start to rise," said Ms. MacKay, who lives just outside Charlottetown. "Your income doesn't go up, unfortunately, with everything. It kind of makes you think, okay, what do I have to do and how am I going to adjust my eating habits, or how [are]my family going to get their food?"

Some companies, such as Maple Leaf Foods Inc., have already begun raising prices on baked goods, meat and other items. But more increases are expected in April and the following months, which could lead to serious challenges for low-income Canadians.

George Weston Ltd., a leading seller of baked goods, said it will raise prices by an average of 5 per cent starting April 1. Metro Inc. said earlier this year that it plans to raise prices on bread, pasta, rice, coffee and cooking oil. There are also signs that Sobeys and Loblaw Cos. Ltd., which is controlled by George Weston Ltd., will follow suit. And Maple Leaf Foods said it may raise prices further in April and May.

"We do think grocery bills are going to go up," said Michael Burt, associate director of industrial economic trends with the Conference Board of Canada. "Food is a significant chunk of people's budgets. … Even a small increase can challenge people's budgets, particularly at lower income levels."

Global supply problems, growing demands from rising middle classes in China and India, the shift toward using agricultural crops for biofuels, and rising fuel prices are some of the factors pushing prices of wheat, sugar, corn, soybeans, coffee and other staples through the roof.

The price of sugar reached a 29-year high earlier this year, while global wheat prices doubled from June, 2010, to January, 2011. World food prices set a new record in January for the seventh consecutive month, according to the Food and Agriculture Organization of the United Nations, which tracks global food prices.

In Canada, the problem pales in comparison to less developed countries, where food prices are pushing millions below the poverty line and sparking widespread unrest, such as the protests in North Africa and the Middle East. But experts say Canadians should prepare themselves for a new reality of higher food prices, which likely aren't going down anytime soon. Economists say overall prices will rise by 3 to 8 per cent before the end of the year.

"For the most part, food costs are rising faster than many other products," said Sal Guatieri, senior economist with BMO Capital Markets. "We do anticipate that food cost will continue to rise."

On Friday, Statistics Canada released the latest consumer price index, which showed food prices were 2.1 per cent higher in February than a year before. But certain food categories saw much higher increases. The cost of fresh vegetables was up 7.4 per cent, while sugar was up 7.6 per cent. Among vegetables, lettuce was up 34.5 per cent and potatoes 11.5 per cent. Meanwhile, prices of fresh or frozen meat excluding poultry were up by nearly 4 per cent, similar to the increase for fresh milk. Coffee went up by 6 per cent and bread, unsweetened rolls and buns by nearly 4 per cent.

The average Canadian household spends about 17 per cent of its income on food, but some economists predict the percentage will closer to 20 in the coming months. Higher prices may force some consumers to cut back on certain products, such as meat, or look for savings elsewhere.

Ms. MacKay said she has been shopping strategically, stocking up on items she expects will soon be more expensive, as well as focusing on buying items like canned tomatoes, flour, cereal and chicken when they go on sale.

"When things like that go on sale, I don't buy one or two - I buy 10," she said.

Ms. MacKay said she spends $500 a month on groceries and is worried that figure could climb by between $25 and $150.

Strategic shopping is one way to stay ahead of rising prices. But experts also say price-conscious consumers should consider changing the types of foods they buy. Households that consume large amounts of meat and bread will likely pay much more than those eating more legumes and rice.

"What consumers can do is start being more choosy about what they're buying," Mr. Burt said. "Price increases we're seeing are more broad-based, but they're not happening to everything."

For low-income Canadians, rising food costs are a serious concern that will likely make it difficult for some to get enough to eat, said Katharine Schmidt, executive director of Food Banks Canada.

Ms. Schmidt added that food banks across Canada are already facing challenges due to high levels of demand, partly because of the lingering effects of the recession.

"We're really concerned for Canadians," Ms. Schmidt said. "I think we're all feeling the changes right now across the board, and then for those who are living with low incomes, it's affecting them in a greater way."