The saga of skyrocketing grocery prices continues. The newest victim? Your bread.
Wheat products now join the list of food products that are experiencing price increases this year, such as fresh vegetables, fruit and dairy, the latter of which notably has seen a six per cent increase due to price hikes by the Canadian Dairy Commission.
Russia’s invasion of Ukraine is impacting wheat production, fertilizer supply and transportation costs due to oil sanctions. Consumers will feel the impact — and soon, experts say.
Since the invasion began, global wheat prices have already risen to levels not seen since 2008.
“Ukraine is a major supplier of wheat,” said Michael Graydon, CEO of Food, Health & Consumer Products of Canada. “Bread, crackers, cookies, things we bring into our home every week, will go up.”
Russia and Ukraine combined had around 14 million tons of wheat and 18.5 million tons of corn left to ship this season, about seven per cent of the year’s global grains trade, according to the United Nations.
Traditionally, the average cost for a bushel of wheat is $6 to $8 (U.S). On Monday, the cost was sitting at $12.94 — double the cost at this time last year.
The new cost of wheat would be stacked on a recent burst of inflation. Statistics Canada reported that bakery product prices rose 7.4 per cent in January compared to a year ago, outpacing even the general food inflation rate of 6.5 per cent.
“The price is going up fast,” Graydon said. “In the first month of this war we saw (wheat) prices see a 30 per cent increase. It may continue at that pace, but that is speculative.”
At the start of 2022, Sylvain Charlebois, professor in food distribution and policy at Dalhousie University, predicted overall food prices were expected to rise by seven per cent by year’s end, which is still a prediction he’s comfortable making for wheat products, but he said the Ukraine conflict has the potential to challenge the seven per cent threshold.
In the U.S., food prices have risen nearly eight per cent, and Canada typically catches up to its neighbour, he added.
As the invasion continues, Ukraine is unlikely to produce grain this year, limiting supply and translating to inflationary costs for the consumer, with prices set to increase in the next three to six months as the harvest season begins, he said.
“Impact on grocery store costs will be seen in the next few months,” Charlebois said.
The impacts won’t be felt here alone.
“Ukraine is called the bread basket of Europe,” Graydon said. “Canada doesn’t get a lot of wheat from Ukraine, but Europe does. They’ll be looking elsewhere to fill the void.”
Russel Hurst, executive director of the Ontario Agri Business Association, said the questions are: is Ukraine able to ship the grain it now has in storage? What does planting look like for spring 2022 in Ukraine?
Right now, some grain is being shipped, but the timelines are affected, he said. Whether farmers in Ukraine are able to plant in the spring is the “real wild card here.”
Ukraine’s planting season is due to start within a month and relies on foreign labour, many of whom are fleeing or will not enter the country.
However, when breaking down all the costs that go into making a loaf of bread, wheat isn’t the most significant expense. Around 10 to 15 per cent derives from wheat, and the rest is from labour costs, packaging and transportation, said Hurst.
So even a dramatic rise in the cost of wheat only affects a loaf of bread’s price so much, he said. Other supply-chain issues like labour shortages and oil price increases need to be factored into the cost as well.
“The longer the Ukrainian invasion lasts or gets worse, that will only drive up the cost of wheat and fertilizer more,” Hurst said.
Another significant factor likely to boost costs is the recent move by the U.S. to stop buying Russian oil — the cost of gas affects the cost of transporting the food and other necessities.
The limited supply from Ukraine could have a positive spinoff for Canadian farmers, as they’ll need to produce more wheat to meet global demand. But good weather and cheap fertilizer would also be useful, said Charlebois.
Western Canada drives the market for wheat production and the widespread drought in 2021 had a significant impact on prices. “Last year was a disastrous harvest season, which is why cost went up,” he said.
Russia is also a major exporter of fertilizer, accounting for 40 per cent of the global supply, and with the current conflict, the limited supply of fertilizer will increase the cost.
Charlebois said it’s important for people to remember that the global agrifood market is interconnected. If a bushel of wheat is more than $12 in the U.S., it will be the same in Canada. The prices of the three grains — corn, barley, and wheat — are all negotiated on global markets.
“We’re in for a wild ride,” he said.
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