December 7, 2012

Canadians should expect the price of meat to increase by as much as 10% next year.

This is according to researchers with a good track record of predicting price hikes. In their annual forecast, researchers at the University of Guelph say they expect retail prices for beef and pork to increase by much more than any other food group, which for the most part will edge up modestly along with the overall inflation rate.

Last year, the school said it expected the overall price of food in Canada to go up by less than 2%, and that's pretty much what happened. Overall food prices rose by only 1% in 2012, data shows. That is because large increases in the price of meat and eggs were offset by large declines in prices for fresh vegetables.

For next year, the school is expecting food prices to increase at a rate just slightly ahead of inflation, somewhere between 1.5% and 3.5%. Within that group, meat and eggs could be in for bigger price hikes. Cattle feed prices spiked in 2012, and that caused ranchers to slaughter their herds earlier so they do not have to spend as much on feeding them.

That created a supply glut for beef that temporarily held down retail prices, but that will not last, the school says. "Because the inventories are now much lower than last year, pressures on beef production and distribution [will impact] the price for consumers," the report says. Beef prices could be set to increase by between 6% and 8% next year.

Pork prices could be set to increase as much as 8-10% this year because of similar supply issues. One of the biggest factors affecting food prices this year was the massive drought that devastated much of the US Midwest through the summer.

Beyond animal feed, bread and grain prices themselves are expected to increase by between 2% and 4%, largely because of consumer preferences away from traditional flour and towards gluten-free and whole-wheat options.

Dairy prices are set to rise by between 1% and 3% mainly because our palates are getting more discriminating. Dairy and bakery products could likely remain cheaper than they would otherwise be, because they are loss leaders for grocery stores - products they sell at a small or negative margin as an enticement to get you into the store to buy other things. And due to increased scrutiny on animal welfare, egg prices could be as much as 5% higher, the school predicts.

The report also forecasts that food bank usage will hit a record high next year, especially if price hikes for meat come to pass.

"And 2013 may see even more wasted food than before," the report says. "Canadian households are wasting 38% of products purchased in store. Restaurants are not doing that much better, with nearly half of all food purchased going to waste."