An inflationary shock to our grocery store agricultural products is inevitable

In the absence of comprehensive and rapid government support, households this summer will not benefit from the pause in inflation that local products usually represent, quite the contrary. And the situation gets even worse in remote areas, where transportation costs add even more to the bill.

Agribusiness stakeholders surveyed by The Canadian Press over the past few days agree: Producers are in a dire situation because their production costs have almost completely skyrocketed. And some of them believe that beyond prices, the whole issue of food security or food sovereignty could be challenged in the medium and long term.

Absolutely, there will be food price hikes, that’s for sure, admits from the outset the President of the Union of Agricultural Producers, Martin Caron. From how many? He can’t say, but it will be important.

fuels

All farm machinery runs on diesel, and while fuel for farm production may be cheaper than that sold at retail for transportation, its price has more than doubled year-on-year. In the spring of 2021, agricultural diesel cost just under 1.00 US dollars per liter. It then rose throughout the year to an average price of $1.26 in 2021. After the outbreak of war in Ukraine, that price jumped to $2.05 a liter on Thursday.

Martin Caron, who is a dairy and grain producer himself, says diesel costs him about $14,000 for the season on his average farm. 000$ de plus, minimalement”,”text”:”Cette année, ça va me coûter à peu près 10000$ de plus, minimalement”}}”>This year it will cost me at least $10,000 more, he said. A 71% increase.

Many growers also use subcontractors for various operations – seeding, fertilizing – who are usually paid by the hour, but these are now adding fuel surchargeanother source of inflation.

These surcharges are also added on the side of the carriers who deliver what they need and on the side of fruits and vegetables, To get fresh produce to the big centers, trucks are still needed, most of which belong to the growersmentions Patrice Léger Bourgouin, General Manager of the Association of Quebec Market Gardeners (APMQ).

fertilizer

The producers here obtain their nitrogen fertilizers almost exclusively from Russia. The war in Ukraine thus exacerbated an already existing problem of overheated fertilizer prices, as Canadian sanctions imposed a 35% premium on Russian fertilizers. Nitrogen fertilizer, which sold for $630 a ton last year, now costs more than $1,500 a ton, almost triple that.

The President of the Producteurs de grains du Québec (PGQ), Christian Overbeek, points out that even before this high tax The value of fertilizers has increased for various reasons such as: B. rising energy prices. Also, some industries had stopped making it because it was too expensive for them to make. They had put their facilities on hold. A rarity emerged.

Since the producers had ordered their fertilizer in summer and autumn 2021, there was a very large unforeseen overload. We had seen inflation throughout 2021 and that’s where the war on fertilizers and fuel brought fresh increasesexplains Mr Overbeek.

Daniel Gobeil, president of the Producteurs de lait du Québec (PLQ), says last year’s droughts in South America and floods in western North America have already pushed up grain prices. There have been many climate change episodes that have caused grain prices to overheata commodity traded on the Chicago Stock Exchange that is very sensitive to changes in supply and demand.

The domino effect of grains on meat and milk

One of the most important uses of grain is animal feed. In animal production, we have been talking a lot about feed costs for about 12 months, especially about the increase in the price of grain, explains Mr. Gobeil. With the rise in fertilizer and fuel prices, this further contributes to the rise in grain. So it’s a fact that we’re seeing price increases month after month and we don’t yet know when those price increases will stop.

Clearly, therefore, further increases in the price of meat are to be expected, and for milk – and by extension dairy products – the record 8.4% increase last February will certainly pale in comparison to what is to come. The milk market is regulated by the supply management system. Each February, the asking price is adjusted based on an analysis of production costs for the previous year ending in October.

However, fertilizer and fuel prices have skyrocketed, especially after October 2021. Consumers must therefore expect massive price increases for dairy products in February 2023, unless the federal government and the Canadian Dairy Commission give in to producers’ demands. They are calling for a more responsive pricing system with a second annual adjustment, possibly in August. For consumers, however, this only means that they will absorb a first part of the increase at the end of summer 2022 and a further part in February 2023.

This formula needs to be adjusted at least twice a year because the response time is too long for farms. We should not make harmful decisions for businessesargues Mr. Gobeil.

Finally, since we are talking about animal production, we should not forget about bird flu, which is very expensive for poultry and egg producers. This is another source of inflation.

labour costs

There are many reasons to celebrate the increase in the minimum wage, an income that is barely enough to survive, but this increase is also being passed on to consumers. Its impact is significant on the part of market gardeners, horticulture and the berry industry.

Martin Caron points out that a study on theUPA showed that % du coût d’une fraise. Chaque fois que les salaires augmentent, automatiquement ça a un impact majeur sur le coût des aliments”,”text”:”le coût le plus important dans ces secteurs, c’est la main-d’œuvre. C’est 50% du coût d’une fraise. Chaque fois que les salaires augmentent, automatiquement ça a un impact majeur sur le coût des aliments”}}”>The most important cost in these sectors is labour. It’s 50% the cost of a strawberry. Every time wages rise, this automatically has a large impact on food costs.

In addition, in the context of labor shortages, many producers are well aware that they must offer more than minimum wage.

interest and bottlenecks

And as if all that weren’t enough, the recent rise in interest rates is hurting producers, who have had to pay more than expected for their inputs. We’re running out of money on our farms, so our people are trying to increase their lines of credit, but at higher interest ratesreveals Martin Caron.

Except that % au niveau agricole, il y a 200 millions de dollars qui sont retirés des marges des producteurs agricoles. Ça inquiète beaucoup les gens parce qu’on parle d’augmentations de 1,5% à venir. Et ça, ça voudra dire qu’il y aura 600 millions de dollars de moins au niveau des bénéfices dans l’agriculture québécoise globale”,”text”:”chaque fois que les taux d’intérêt augmentent de 0,5% au niveau agricole, il y a 200 millions de dollars qui sont retirés des marges des producteurs agricoles. Ça inquiète beaucoup les gens parce qu’on parle d’augmentations de 1,5% à venir. Et ça, ça voudra dire qu’il y aura 600 millions de dollars de moins au niveau des bénéfices dans l’agriculture québécoise globale”}}”>Every time farm-level interest rates increase by 0.5%, $200 million is pulled from farm-producer margins. This worries people a lot because we are talking about a 1.5% increase in the future. And that means Quebec’s farming industry will lose a total of $600 million in profitshe said.

To top it off, the fragility of supply chains is causing headaches, particularly on the fresh produce side. Patrice Léger Bourquoin reports that there is a shortage of food elastics, which are used to pack broccoli or asparagus, for example. These rubber bands are from China and due to COVID no orders are arriving. Also, there are no boxes. I shouldn’t have any trouble stocking up on boxes. North American corrugated board production is still quite significant. But the explosion of online commerce has meant that there is currently more demand than supply can fill, and there too we have to pay more.

The state to save the consumer?

We won’t be surprised if producers ask for state aid. They’ve been doing it for years, for all sorts of reasons, usually related to the vagaries of the weather. But even discounting the skyrocketing costs, it would be difficult to prove them wrong.

The latest report agricultural policy : monitoring and evaluation by the Organization for Economic Co-operation and Development (OECD), published in 2021, reveals that Since the late 1980s, Canada has drastically reduced agricultural support. It has halved between 1988 and 2002 and % des recettes agricoles brutes, environ la moitié de la moyenne OCDE“,”text”:”a été de nouveau divisé par deux entre 2002 et 2020, et représente maintenant 9% des recettes agricoles brutes, environ la moitié de la moyenne OCDE”}}”>halved again between 2002 and 2020 and now accounts for 9% of gross farm receipts, about half the average OECD. In other words, Canada gives its producers half the average for US countriesOECD.

We may want to be efficient, productive, but all of that has its limits, says the UPA President. If we want to remain competitive, we need agricultural support at the same level as the others. In the United States they receive twice as much support as in Canada and even more in Europe.

It’s really important that we have support if we want to keep our agriculture. When the pandemic hit, Mrs. [la ministre fédérale de l’Agriculture, Marie-Claude] Bibeau and M. [le premier ministre du Québec, François] Legault said: We will not let our people down. We will have funds to support. We therefore expect support programs for producers that may have less of an impact on the price for consumers..

Without government aid, consumers are sure to experience a large increase because producers cannot produce at a loss. On the other hand, The purchasing power of consumers still has its limits, states Daniel Gobeil. The Canadian government must come to help the sector and limit inflation for consumers.

food safety

What if they lose their competitiveness to growers in the southern United States, Mexico, or other warm countries that grow year-round with lower labor costs and environmental regulations? Karon. We’re talking about organic food policy in Quebec. At the federal level, we are also talking about agriculture, but there is one more step to take. We are talking about autonomy and it is about the sustainability of agriculture.

: \”Si c’est une saison aussi difficile que l’an dernier, ça se peut que je réfléchisse à faire autre chose.\””,”text”:”Je suis préoccupé parce que cette année, il y a une ambiance un peu morose, raconte de son côté Patrice Léger Bourgouin. Ces jours-ci, j’ai au moins un membre ou deux qui m’appellent par semaine pour me dire: \”Si c’est une saison aussi difficile que l’an dernier, ça se peut que je réfléchisse à faire autre chose.\””}}”>I’m worried because there’s a bit of a gloomy atmosphere this year, says Patrice Léger Bourgouin. These days at least one or two members call me a week and say, “If the season is as tough as it was last year, maybe I’ll think about doing something different.”

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