Soaring dairy prices drive steepest rise in food inflation in 13 years

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Grocery bills are rising at the steepest rate in 13 years, driven by major swings in the price of butter, cheese and pasta, according to Statistics Canada’s latest Consumer Price Index.

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Food retail prices rose by 8.7 per cent in March compared to the previous year — the highest year-over-year increase since 2009. The jump in food outpaced the overall consumer price inflation of 6.7 per cent for March, Statistics Canada reported on Wednesday.

Dairy and egg prices rose faster than they have since 1983, with milk prices up 7.7 per cent, cheese up 10.4 per cent and butter up 16 per cent. Pasta rose by 17.8 per cent in March at a time when the supply of wheat is tight due to last summer’s extreme drought that dramatically cut crop yields in Western Canada.

Statistics Canada said the price of breakfast cereal rose more than 12 per cent year over year — the biggest increase since 1990 — as prices for wheat futures “reached a 14-year high in the context of the conflict between Russia and Ukraine, two major wheat exporters.”

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Rising costs of fuel, fertilizer, ingredients and transportation have rippled through Canada’s agri-food sector, most obviously in the dairy industry.

In February, the Dairy Commission of Canada (CDC) — the federal body that controls farm-gate milk prices under Canada’s supply management regime — announced an 8.4-per-cent increase in the price that dairy companies pay farmers for their milk. The historic increase was meant to account for higher fuel, feed and fertilizer costs, the CDC said.

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Processors responded with price increases of their own. Lactalis Canada Inc. — part of the French dairy giant that owns Beatrice milk, Astro yogurt and Black Diamond cheese, among others — upped its prices on grocers by up to 15 per cent to account for the CDC’s milk increase, as well as higher labour, transport and packaging costs.

Canada’s big grocery chains say they’re under pressure from suppliers to pay more for shipments of products, but some have been pushing back — resulting in public disputes that have stripped product off shelves. Late last year, the global confectioner Mondelēz International Inc. stopped shipping Oreo and other biscuit brands to Loblaw Companies Ltd., after the supermarket chain refused to pay more for the products. That situation played out again, much more publicly, when PepsiCo Inc. stopped shipping its Frito-Lay snack products to Loblaw stores across the country in a price standoff that dragged on for two months this spring.

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