After a year that saw considerable attention to the rising cost of groceries, Canada’s Food Price Report predicts food prices will continue to increase in 2024 – but by less than last year.
The annual forecast, prepared by the University of Guelph, Dalhousie University, University of British Columbia and the University of Saskatchewan, predicts food prices will rise by 2.5 to 4.5 per cent in 2024 – an increase of up to $701.79 for a family of four.
This is less than the increase of 5 to 7 per cent predicted for 2023, but still challenging for many families, whose budgets have been stretched by rising costs of housing, utilities and debt.
One of the most striking findings of the report was that Canadians spent less on food in 2023, despite rising prices. This suggests that Canadians may be reducing either the quality or the amount of food that they are buying, perhaps as a result of other rising costs.
“Last year was a challenging year for consumers, with rising food prices and increasing levels of food insecurity impacted by climate change, geopolitics and other factors,” said Dr. Evan Fraser, director of the Arrell Food Institute and U of G lead on the report.
“The Food Price Report predicts we will see further increases to food prices, although changes are on the horizon due to increased levels of competition between grocers and the anticipated grocery code of conduct in 2024.”
Why are food prices rising?
Canadians may wonder what is behind the steep rise in food costs, with some suggesting that price gouging, profiteering or carbon taxes may play a role. The Food Price Report found little evidence for these explanations. Although grocery profits did rise since the pandemic began, this was largely due to inflation; indeed, most price markups occurred in 2020, but were negative or zero in 2022.
The impact of carbon taxes, meanwhile, is complex and difficult to determine. “It would be misleading to assert that carbon pricing has a direct and straightforward impact on retail food prices, and it would be equally misleading to claim otherwise,” say the report’s authors.
Meanwhile, climate change and geopolitics are expected to contribute to food price fluctuations in 2024, and the rising cost of food, high interest rates and other increasing expenditures are expected to put additional strain on Canadians’ wallets.
Predictions from 2023 saw food prices within the expected range, except for bakery items, which cost more than expected, and dairy, which cost less. Amongst G7 countries, Canada had the third-lowest food inflation rate.
However, Canadians are spending less than expected on food. In 2023, Canadians reduced the amount they spent on food and beverage retail by 3.26 per cent. This resulted in lower-than-expected food expenditures overall in 2023.
U of G expertise improving predictions
Dr. Graham Taylor and colleagues Kristina Kupferschmidt, Dr. Ethan Jackson, Sara El-Shawa and Cody Kupferschmidt, use machine learning techniques to improve the analytic models that are the backbone of the Canada Food Price Report.
This year saw the team taking initiative with a new approach. With the advice of subject matter experts, they identified a series of factors that could impact food prices including information on climate (drought, snowpack and weather patterns), economics (such as employment rates, goods prices and price indices) and geopolitics (wars and global conflicts).
“Last year saw the return of El Niño, which can have major impacts on precipitation and temperatures in North America,” said Cody Kupferschmidt. “By including climatic factors such as El Niño, drought and water availability in our model, we were able improve predictions for several categories including fruit and vegetables.”
Including these factors in the model helped the team more accurately predict prices in the 2024 report.
Other new strategies involved the use of transformer-based machine learning models – similar to the underlying technology used by ChatGPT – to improve predictions, and using ensembles, or the combination of multiple models rather than one model, to ensure accuracy.
Kristina Kupferschmidt emphasized the significance of this approach, stating, “Transformers are an amazing technology, but in order for them to perform well, they require large amounts of high-quality data. We found that by incorporating data from the key factors suggested by food economists, we were able to leverage these sophisticated models for more accurate forecasts.”
Other U of G authors and advisors who contributed include Drs. Maria Corradini and Jess Haines and Paul Uys.