Mr. Chair, members of the Committee, good morning. Thank you for inviting me to testify today.
The work done by the Committee on issues related to food price inflation is essential to deepen our knowledge and to propose solutions.
About one year ago, I appeared before the committee and recommended that the government do more to release data and analysis to improve our understanding of the drivers of food price inflation. I appreciate that the committee made that recommendation in its report and that the government acted on it last fall. StatsCan's food price data hub and increased focus on the issue inside Agriculture and Agri-Food Canada is a step in the right direction, but much more can be done to provide public data and analysis to inform the policy debate.
Today I want to offer several observations and make another recommendation.
First, policy-makers are not usually lucky enough to get such consistent evidence as we see around food price inflation. The Bank of Canada, academics, researchers and public institutions in the U.S. and the EU all point to food inflation being driven higher by a long list of causes. Most conclude that inflation will slow when those causes, from Russia's war to higher interest rates, resolve themselves. The consistent evidence underscores that increasing food prices is not the fault of a single actor and stabilizing them will require multiple different actions.
Second, the grocery retail landscape in Canada is more competitive than we often give it credit for. Even last year's Competition Bureau report, which concluded that grocery margins have increased by a modest yet meaningful amount, highlighted that the grocery sector is a low-margin competitive business. The bureau cites foreign retailers who admit that it could be difficult to compete on cost in Canada.
Third, food price inflation is a value chain challenge that requires value chain solutions. This is underscored when a retailer freezes its prices and then passes that freeze on to its suppliers. Tension between suppliers and retailers can be a healthy force to keep food price inflation in check when the appropriate checks and balances are in place. An effective and meaningful code of conduct can be one of those checks and balances.
Fourth, grocery stores are big, complex spaces, and the food in a shopping cart behaves in different ways. Much attention is paid to the top-line food inflation number, but when you dig deeper, you see that in December you could get fish, some vegetables and bananas for less than you could a year ago. While no one expects deflation in the overall food price index, the variability in the food basket speaks to the different drivers of inflation and the need for different solutions to stabilize them.
A final observation is that it is challenging when we try to pass judgment on data alone. If you told people that retailers' net cash income in 2022 was 31% higher than in the five-year average before, some might claim profiteering. If you saw a net-worth increase by double digits between 2019 and 2021, in the midst of the pandemic, some people would worry about the impact that has on food prices, but those numbers don't come from the retail sector in Canada. They come from Canadian farms. No one should claim that farms' incomes are rising too fast, but it shows how it can be inappropriate to draw conclusions on the drivers of food inflation without a much deeper understanding of the broader context along the supply chain.
We've seen government take a more thoughtful approach to issues like this. In the midst of the global supply chain disruptions, the government launched a national supply chain task force with the objective of making independent recommendations regarding short- and long-term actions to alleviate supply chain congestion.
I recommend that the government launch a food value chain task force. The task force should have three priority mandates. First, it should build on StatsCan's data hub by producing detailed analysis on food inflation drivers along the value chain. Second, it should make concrete recommendations for the public and private sector with a focus on where Canadians can act. This should include retail, but it must also include an examination of systemic issues—including supply chain fluidity, regulatory burden, taxes, underinvestment in R and D and declines in productivity growth—and make recommendations that can drive those costs down.
Finally, it should look at where the government can act to support those Canadians who are hardest hit by higher food prices. Food Banks Canada gave Canada a D+ in its inaugural poverty report card, highlighting that the impact of food price inflation is a broader poverty challenge that must involve solutions beyond the food system's scope.
Unfortunately, the supply chain task force has shown that writing the action plan can be the easy part. Acting on it is much harder. Complex issues do not always lend themselves to the silver bullets that governments seem to prefer. While it is easy to say that all options are on the table to stabilize prices, there seems to be a focus on the retail sector, with other more sensitive but potentially more impactful policy changes actually off the table.
As food inflation shows, many of these systemic issues and pressures will remain. Even if the political pressure falls as food inflation falls too, the opportunity will still exist to do something substantive. It may not be easy, but it will be worthwhile.