Mr. Speaker, like lasagna or moussaka, food prices are built in layers. Four cents of excise tax sits on top of a freight surcharge, which is layered on top of additional labelling requirements, new packaging restrictions and the cost of fertilizer, refrigeration, shipping, tariffs and taxes.
No single cost explains the whole grocery bill, but the grocery bill comes at the end of a long conveyor belt, and every additional cost placed on that belt eventually moves toward the consumer. At a time of record food bank use, when those of us who shop animatedly compare prices with each other in disbelief, when people are skipping meals to save money, we owe it to Canadians to ask what every decision we make in this place means for the cost of food.
When the Prime Minister claims, as he did in this chamber on March 25, that “Affordability is the best it has been in over a decade”, it is clear to me that he has not been to the grocery store. Food prices are now 29% higher than they were five years ago, while they rose only 9% over the previous five years. If we feel like food inflation has accelerated, that is because it has.
Bill C-38 is a very short bill that would do three things. It would extend the fuel tax holiday on gasoline, avgas and diesel until January 31, 2027; it would bring back half the normal rate from February 1 to March 31; and then it would restore the full tax on April 1, 2027.
I support this relief, but I think it should not be fleeting. The cycle of providing temporary relief, panicking at the expiry date and extending it for a few more months leaves too many businesses wondering what will happen next. Diesel prices are already extraordinarily volatile. Statistics Canada reported on September 17 that producer prices for diesel rose 9.6% in August alone and were 75% higher than a year ago. These are enormous movements in the price of an essential business input.
Now, Ottawa cannot set the world price of oil. Parliament cannot legislate peace in the Middle East or guarantee the price of a barrel of crude next spring, but when the market is unstable, there is an even greater responsibility for government to provide stability in the things that it does control. Nowhere is that more important than in food.
Agriculture and Agri-Food Canada estimates that transportation accounts for seven cents of every dollar Canadians spend on domestically produced food. The comparable figure in the United States is less than five cents. This is because Canada has longer distances, a more dispersed population and a climate that requires us to move food enormous distances, particularly through the winter. Fuel prices, therefore, have a direct relationship with the cost of feeding our country.
We see this in my home communities on Vancouver Island. Out here, people speak of planes, trains and automobiles, while in B.C., we also have seaplanes, helicopters and ferries to contend with. Much of our food arrives after travelling by truck, rail, ship or some combination of the three. There is always another transportation leg before it reaches a grocery store in Nanaimo, Ladysmith or Gabriola. The cost of diesel, therefore, enters our food system long before the produce truck arrives at the grocery store loading dock.
Farmers use diesel to fuel their equipment during planting and harvest. Ingredients travel to processors. Packaging has to be manufactured and delivered. Warehouses consume energy. Refrigerated warehouses consume even more energy. Finished products travel to distribution centres, grocery stores, restaurants and institutions.
I am chairing a national food affordability task force, and I heard about the cost of diesel at every farm, every processor and every grocer I visited this summer. High diesel costs have a cascading effect across the supply chain, and uncertainty amplifies that effect.
The Agri-Food Analytics Lab at Dalhousie University has found that diesel and grocery prices have moved remarkably closely together over the last 30 years. That does not mean diesel alone determines the price of food, but it confirms what anyone involved in the food supply chain already knows, which is that energy and transportation costs, that is, gasoline, aviation gasoline and diesel, are deeply connected to what Canadians eventually pay at the grocery store.
The Dalhousie lab has modelled what the present diesel shock could mean. If high prices persist through the winter, grocery inflation could peak between one-half and seven-tenths of a percentage point higher. A shorter-lived spike could produce an effect closer to three-tenths or four-tenths of a point. Either way, it is going to cost us. The Dalhousie analysis works the diesel and other cost shocks through contracts, inventories and the supply chain over many months and provides a solid basis for believing, as many members have said today when answering questions and in their remarks, that the government will need to extend this measure again and, very possibly, again.
We spend enormous effort in this place debating grocery prices after they have risen. We need to start thinking about affordability problems before they show up at the checkout because uncertainty and volatility have a price. Businesses protect themselves against it through shorter contracts, larger contingencies, higher working capital requirements or delayed investment. Smaller businesses generally have fewer ways to hedge their exposure and less balance sheet capacity to absorb a sudden change. Dalhousie's agri-food lab has highlighted precisely that vulnerability among smaller processors and independent distributors as one of the many explanations for why we are experiencing food inflation.
As well, there is a broader principle here that does not depend on agreement about the ultimate tax rate. If the policy objective is to hold this tax at zero while energy markets remain severely disrupted, then why do we not give businesses a horizon measured in years rather than in weeks or months? Our food costs would really benefit from that. A government faced with volatile markets should be trying to reduce uncertainty, not add another layer to it.
The Prime Minister talks a lot about the things we can control. Well, government taxation is one of those things. Not every increase in food prices has the same cause, and government cannot control all of them, but where government itself is adding cost or uncertainty, we have an obligation and an opportunity to act.
Agriculture and food businesses experience individual departmental policy decisions cumulatively. That means they pay the transportation cost, the packaging cost, the tariff, the regulatory cost, the energy cost and the tax at the same time. Each department may conclude that its individual measure may have a modest effect, but grocery costs do not stay nicely in departmental silos, and the cost of the whole is sometimes more than its parts. The final price reflects the entire supply chain and all of the policy changes along the way.
Canada will always be a country in which food travels considerable distances. Diesel and avgas are critical inputs. Temporary relief can buy time. We should use that time. Four cents a litre is only one layer in the price of food, but it is a layer entirely within Parliament's control. When diesel prices are already up 75% in a year, we should be looking for layers we can take off, not deciding when to put them back on.
I support the relief contained in Bill C-38. I would like us to go further, however, and provide the long-term certainty that lets businesses plan.