Inflation: An Assessment of Rising Food Prices in Greater Toronto Area
By Zartasha Zainab
If you have noticed that you are paying more while your shopping cart is getting smaller and smaller, you are certainly not imagining it. There are 5.8 million who are struggling with food insecurity. That is 1/6 of households relying on income support. Many Canadians have faced the challenge of seeing a gradual rise in food prices which is gradually becoming difficult to afford. Families are using tactics including price matching, reducing expenditures, relying on community support services or even investing in community urban gardening programs for support. This paper will explore recent studies conducted on understanding food inflation across Toronto and globally. It will look at causes including the Russia-Ukraine Conflict, the pandemic, Canadian-American trade policy, CEOs profiting, higher input costs, and supply chain disruptions. Secondly, it will look at how Canadians are coping with the rising prices including food banks, price matching, selling property, relying on community support and services, and urban farming. The third part will conclude with policy recommendations that are needed to address this crisis effectively and efficiently including providing income support, creating a plan for the ongoing inflation prices and providing support to charitable and support initiatives that are being overburdened.
Part I: Identifying Causes of Food Inflation
There are several identified causes that are resulting in food inflation in Canada that have been identified including international affairs, mainly the conflict between Russia and Ukraine, a region that is a major producer of staple foods in the global economy, the pandemic, weather, global affairs, the Biden buy-American policy, CEOs profiting which will be explored.
Russia-Ukraine Conflict – A Major Distributer of Staple Foods
The conflict between Russia and Ukraine has taken a toll on global food prices and has resulted in global food inflation hitting developing and emerging economies the hardest. Canada is not exempt from its impact. There is global reliance on the region for fuel and grain imports which could exacerbate political turbulence even further. Ukraine is the world’s largest producer of sunflower oil alongside Russia making it responsible for over half of global exports of vegetable oils. The region also exports over a third of the world’s wheat. There is a major decline in the supply of major staple foods leading to rising food prices. The United Nations Food and Agriculture Organization reports that the global Food Price Index averaged 159.3 points in March 2022 up 17.9 points (12.6%) from February. This is the highest level since its inception in 1990 (Emediegwu, 2022).
We can see that food insecurity has often resulted in civil conflict throughout the course of history. Anti-government protests are often followed by international food price inflation, bad weather conditions and shrinking farmlands along with unemployment and dissatisfaction with the corrupt political classes. Fragile institutions, political instability and non-diversified economic structures are central factors that couple amplify the effects of the Russian invasion of Ukraine on food prices in emerging economies and it is therefore critical to tackle (Emediegwu, 2022).
COVID-19 has drastically impacted the food industry which has impacted food prices. These include supply chain disruptions, labour shortages, changes and changes in consumer purchasing patterns amongst other variables. It has resulted in disruption in the supply chain such as processing, packaging and transportation and business closures. Many food purchases made at restaurants have shifted to purchases from stores. Public health measures placed to prevent transmission of COVID-19 also impacted consumer spending patterns. Restaurants were unable to deliver in-person services and opted for take-out options. Sales fell almost 61.3% compared to pre-pandemic levels. Suppliers changed their strategies to cater to buyers in grocery stores as opposed to restaurants. The outbreaks also led to facilities going into temporary closures impacting prices due to processing costs such as higher labour costs due to overtime or additional transportation costs due to moving materials through non-traditional processing sites (Fradella, 2022).
The weather has also impacted food prices impacting the supply chain of many food products and resulting in higher prices. In 2021, the Prairie provinces went through severe heatwave and drought conditions resulting in higher prices for meat (beef) and grain products. Reduced grain meant reduced animal feed making livestock difficult. International heatwaves in agriculture have resulted in elevated costs impacting food imports as well leading to higher costs for meat at grocery stores. The United States, Canada’s major agricultural trading partner has also experienced the worst drought in the last 1200 years due to heatwaves, extreme rainfall and flooding and snap freezing contributing to increased prices of fresh vegetables and fruits in October 2022. Brazil, another major exporter of coffee and sugar experienced a drought causing another rise in costs in 2022 (Fradella, 2022).
Biden’s “Buy American” Policy
Biden’s “Buy American” policies have had negative impacts on the Canadian economy as a major trading partner. This includes $8 Billion in Lumber, $17 Billion for Steel and $500 million in Asphalt contracts all in jeopardy if Biden tightens trade rules. This has resulted in increased manufacturing costs.
Members of the Parliament summoned heads of Canada’s largest grocery store chains to answer the question of rising food prices. On Monday, February 13, 2023, the House of Commons committee studying food prices inflation called the CEOs and presidents of Loblaws company, Metro, and the Empire Company Limited which operate chains including Sobeys, Safeway, and FreshCo to attend upcoming meetings. Executives testified to rising costs but not CEOs. MPs have decided to have more meetings aside from just CEOs. Retail Council of Canada which advocates for grocery said they want to call on global brands, manufacturers, processors and wholesalers. Canadians need an analysis of food inflation but this has not yet happened. Metro declined to comment while Loblaws and Empire Company Limited didn’t immediately respond to the comment. Statistics Canada reports a 10% increase in prices, the fastest pace since 1981. The grocery CEO is making more money than ever before. Bureau said many factors are contributing including the extreme weather, higher input costs, Russia’s invasion of Ukraine, and Supply Chain disruptions. Empire Company Limited said there are global challenges that are increasing the costs of food production and suppliers have no choice but to ask retailers for significant price increases if they are to remain profitable (Djuric, 2023).
Prices for food products are expected to rise by 11% this year by major chains and are expected to go up by another 5-7% in 2023 after recording the inflation year. Chains including Pepsi are increasing prices by up to 17% because customers are willing to pay a little bit more for treats and are hiking profits. Loblaws is fixing prices on their brands such as ‘No Name Brand’ because they control the supply chain from start to finish but they cannot control prices for other brands. The debate on prices and profits is far from over (CBC News, 2022).
Part II: Understanding how Canadians are Coping with Food Inflation
Food inflation has been burdensome for Canadians. There are 5.8 million who are struggling with food insecurity. People are dealing with the rising prices using a number of tactics such as backyard gardening, price matching, and growing food in the community including providing yard garden harvest projects, and services. Yard sales are a problem many people can be replicating.
Providing produce including Broccoli, and cherry tomatoes. A lot of people are making difficult decisions such as relying on community support because people cannot afford food. People are choosing between losing their house or money. People who are working full-time are having difficulty making ends meet. Charities are falling under strain. People can’t just keep relying on prices and people may move out of Canada just for survival needs (CBC News, 2023).
Prices are set to soar higher. Many Canadians are already shocked and a family of 4 can expect the bill to rise by more than 1000$ meaning 16 288$ annually. People are paying more but getting lesser. New numbers from Canada Food Price Report show 10.3% this year due to geopolitics. All sections of the grocery store due to the invasion of Russia were impacted. The price of lettuce went up by 400% increase. Restaurants are absorbing those costs. Grocers testifying to House of Commons saying they are not rising costs but CEOs of corporations are making profits. They have been accused of price gouging and recording record profits (CTV News, 2022).
2023 will be a mirror image of 2022, a slow constricted economy at the beginning of the year and a strong end of the year. We are looking at another recession year. Any recession means jobs will be lost, businesses will suffer. Our labour market is solid. 2022 we say increases in unions, strikes for better worker pay looking for wages, flexibility and going for hybrid work power. Still, with the precarious economy, the balance of power can shift meaning workers who are not as efficient will have to go. In terms of housing, many homeowners will have to negotiate costs with higher interest rates and distress selling. Affordability is a big question and Canada may become a renter nation. The debt levels are increasing with people relying on credit cards trying to get through inflation (CBC News The National, 2022).
Part III: Policy Implications
Some policy interventions include:
- Increasing income of low-income households
- Look at new creative avenues of producing food locally and sustainable agriculture
- Have a task force that is monitoring the supply chain and consumer purchasing patterns to ensure public awareness and transparency to reduce political turbulence and civil conflict
- Have population surveys to track invisible homelessness and security
- Have a program for delivering necessities in low-income communities
- Ensuring that food banks and charities are not overburdened with the task of supplying food to low-income and have sufficient support
In conclusion, there are many ongoing social, political global and environmental forces that are resulting in food inflation and it is critical for the government to address the rising challenge.
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