Finance Committee on Oct. 19th, 2023

[Arpan Khanna, Conservative, Oxford, ON]

The reason I'm asking is that we've seen, as you mentioned, that the competitiveness of our farmers goes down when they're competing...for example, with a pound of asparagus from Mexico versus a pound of asparagus from Canada. My farmers have told me consistently that they're paying a lot more. It's hard for them to compete in the market. You mentioned that you wanted to make sure farmers' markets were a part of this strategy, which is why I brought that up.

Do you think the carbon tax does hurt the competitiveness for our local farmers when it comes to providing affordable groceries?

[Dr. Sylvain Charlebois]

The challenge with the carbon tax at the farm gate is that farmers have no ability to pass on extra costs to their clients. That's the biggest challenge. I think it's being recognized in Bill C-234 right now. That's why I'm hoping it will pass. The economics around farming are far different from supply chain economics.

[Arpan Khanna, Conservative, Oxford, ON]

Right.

I'm sure you've been following the news from the government. They staged a massive photo op with the grocery CEOs, forcing them and saying, “You have to reduce prices”. You just mentioned right now that we should not be looking at the retail side. Do you think the government's photo ops will lead to any reductions in prices?

[Dr. Sylvain Charlebois]

In full disclosure, our lab has been working with Minister Champagne since July in terms of food inflation and bringing him some ideas on how to tackle issues. I was at the meeting with the big five, along with Minister Champagne. I think it was actually a fruitful conversation.

Moving forward, I do believe there is more that the government can do. Some of the things the government can do are things that have actually—

[Arpan Khanna, Conservative, Oxford, ON]

Do you think it will reduce prices, and by when will it reduce prices?

[Dr. Sylvain Charlebois]

I don't think it's a good idea for Parliament to control, fix and set retail prices. I think it really opens up a can of worms. It's a dangerous road to take.

In France, and I think to a certain extent Minister Champagne is inspired by France, they actually set up a guideline for 5,000 grocery products. It wasn't about price setting. It was more a guideline for industry. The discussions included manufacturing. Actually, France in fact started with manufacturing before going with retailers.

[Arpan Khanna, Conservative, Oxford, ON]

Do you think it was a wrong step for the government to jump the queue instead of working with our manufacturers first?

[Dr. Sylvain Charlebois]

I did recommend to Minister Champagne to start the conversation with manufacturers. He decided to start with the big five. That was the decision of the cabinet.

[Arpan Khanna, Conservative, Oxford, ON]

It must not be a sexier photo op, I guess. Thank you for that.

You also talked about the supply chain and trucking and transportation logistics. How much do you think that plays a role in food prices? Do you have a rough percentage? I know you said it was difficult to compound all of that, but is there any ballpark figure you can give us on the numbers we're looking at?

[Dr. Sylvain Charlebois]

We don't have a figure right now. We're desperately looking into the matter right now, but it's hard to overlook. When you talk to transportation companies, they are charging more to transport anything.

Frankly, because we are a large country with only 40 million people, you have to look at logistics. Our logistical system is not that efficient. It's very costly and it requires more energy. When it requires more energy, the carbon tax is actually added to that. That's why we need to look at the compounding effect of the carbon tax across the supply chain. Right now, we haven't seen anything looking at that issue.

[Arpan Khanna, Conservative, Oxford, ON]

Then you would agree that—

[The Chair, Liberal, Peter Fonseca]

Thank you. That's the time, Mr. Khanna.

It does go quickly, but we want to get through the full third round.

MP Baker, please, go ahead for five minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much.

I'd like to direct some of my questions to Mr. Charlebois as well, if I may.

Welcome back to the committee, Mr. Charlebois.

In a prior exchange and a discussion with one of my colleagues, you said that the Bank of Canada estimated the impact of the price of pollution on grocery prices was about 0.15%. You also said that it's impossible to estimate accurately the impact of the price of pollution or of the carbon tax on grocery prices.

One thing I hear from my constituents in Etobicoke Centre all the time is the question, “Why are grocery prices so high?” We've spent a lot of time on this aspect. I'd like to talk about some other causes of food prices and grocery prices being so high.

My first question is this. Could you share with us, to the best of your abilities, what the impact of Russia's invasion of Ukraine is on food prices?

[Dr. Sylvain Charlebois]

Thank you for the question.

The February 24, 2022, invasion of Ukraine really happened at the worst time. The world was slowly recovering from the pandemic. Supply chains were starting to show signs of recovery. Then, February 24, 2022, happened, and commodity prices went up. In fact, a bushel of wheat was $13 U.S., just to give you an example. That's basically double what it normally is. All commodity prices were hit, actually.

We kind of experienced what happened in 2008 with the financial crisis, but it was much worse and it lasted longer. We paid for that for several months after, I would say, probably September 2022 to about August of this year. We're starting to see prices drop, because commodity prices are actually much lower. A bushel of wheat is now at $6.35 U.S. It's much more manageable.

If you look this week's CPI report from Statistics Canada, there are many items that are actually cheaper now than just a month ago: coffee, flour, tomatoes and potatoes. That's a sign that things are softening. Because of the blow we had to absorb back in February 2022, we are now past that.

At the end of the Black Sea deal this summer, I was very concerned about India's position on rice. Markets are much more rational right now, which is actually helping Canadians.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Surely, what Russia has done to deteriorate Ukraine's agricultural capacity—bombing farms and grain storage.... We've all seen these scenes on television. There isn't a Black Sea grain deal, really. Ukraine has found a workaround right now to try to export its food. It produces about 10% of the global wheat supply, and a bunch of other things.

Surely this is having an impact on prices still today—is it not?

[Dr. Sylvain Charlebois]

Not necessarily for us in Canada. You see, in Canada and North America, there's a bit of a food security bubble compared to Europe. We often say that Ukraine is the breadbasket of the world. It's actually the breadbasket of Europe. We don't really import a whole lot from Ukraine. In North America, we produce a lot of commodities, and we do process a lot of it here on our continent.

That is why, when you look at the entire globe with food inflation, Europe was really a mess for a long time. In Canada and the U.S., the food inflation rate is much lower. In fact, Canada has the second-lowest food inflation rate within the G7 still today. The only other country that's lower than us is the United States at 3.7%.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I appreciate that. I think it's worth noting, for all members of the committee, what you just said: We have the second-lowest food inflation rate.

[Dr. Sylvain Charlebois]

It's been like that for a very long time—at least 13 months now.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I think it's important for people to take note of that.

I'm conscious of the fact that I only have a minute left.

We know that we have a lot more extreme weather events in the world, which are driven by climate change. What's the impact of that on food prices?

[Dr. Sylvain Charlebois]

Currently, if you ask me, the three items that we are expecting to become more expensive in the next several months in the grocery stores are beef, orange juice and cocoa—chocolate. Why? All three of these commodities are being impacted by climate change.

Beef is impacted by droughts. In the case of cocoa, in Africa, there are some issues with lack of water also. With orange juice, it's because of hurricanes in Florida, so futures are way up.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I'll just say, if I can have some time.... I know a few members have gone over time and it—

[The Chair, Liberal, Peter Fonseca]

Yes, I know. Go ahead and finish.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

What I take away from your testimony is that action on climate change is incredibly important, not only to save our planet—for those reasons—but also because extreme weather events driven by climate change are contributing significantly to the cost of food and food inflation, and will contribute even more if we don't stop climate change.

[Dr. Sylvain Charlebois]

I would agree with that.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Baker.

We'll go to MP Ste-Marie now.