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This was also published on the conversation.com
Negotiations for a revised North American Free Trade Agreement have been ongoing for more than a year, but now it’s crunch time — especially for Canada.
What happens in the coming days will determine if NAFTA survives as a three-country trade pact or whether Canada will be left on the sidelines.
Since U.S. President Donald Trump announced the United States had a deal with Mexico that could replace NAFTA, Canadian negotiators have been putting on a brave face publicly. Foreign Affairs Minister Chrystia Freeland was optimisitc when talks took a break before the Labour Day weekend and Prime Minister Justin Trudeau has said “no NAFTA deal is better than a bad NAFTA deal.”
Trump, for his part, took to Twitter to keep up the pressure on Canada.
There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere w/ these negotiations or I will simply terminate NAFTA entirely & we will be far better off…
There are two significant issues still on the table: How to resolve inevitable trade disputes and Canada’s policies that protect its dairy industry from foreign competition.
How will disputes be resolved?
Currently, each government can review the actions of others and make a determination of whether trade action against a sector is warranted. These determinations can be appealed to the relevant court in each country.
If the dispute is not resolved, it can be appealed to the NAFTA Free Trade Commission and further to a bilateral panel to arbitrate the dispute. The panellists (two from each country and an alternating chair) are appointed by the disputants. The decisions of these panels are binding. It is this last provision that apparently is the sticking point for U.S. negotiators.
It is worth noting this aversion to dispute resolution is not specific to the Trump administration. When the original Canada-U.S. free trade agreement was negotiated 30 years ago, Brian Mulroney’s Conservative government also threatened to walk away without a deal over the issue on how to resolve disputes. In 1988, U.S. negotiators only conceded at the 11th hour.
Leave it to the courts
The United States believes domestic court systems should be able to effectively determine the legality of specific actions and, as such, these panels are an affront to national sovereignty. Canada feels Chapter 19 is an essential element to ensure the fair implementation of freer trade.
Those who believe the panels are not necessary or effective point to the fact that Canada has won several findings in the softwood lumber dispute without actually getting a positive resolution. Past U.S. administrations have also ignored panel findings and forced the Canadians to strike compromise deals or face continued countervailing duties. The U.S. lumber industry remains one of the most vocal opponents of these dispute settlement panels.
But others in all three countries argue the panels are an essential protection despite not being frequently used in the past 10 years. There is little sign of bias because these panel findings are frequently unanimous.
In the end, there will be a mechanism to resolve disputes. Canada will have to decide whether retaining the panels is worth not making a deal. The U.S. will have to decide how far it wants to go on making concessions, balancing its desire for more sovereignty with the political reality of striking a deal that Congress will approve — a critical step in the final implementation of any new agreement.
Canada’s dairy policies a major issue
Canada’s supply management system uses quotas supported by tariffs to stabilize its dairy markets. Many countries have support programs for agriculture generally and the dairy market specifically.
While there is some criticism within Canada of supply management — most notably Maxime Bernier’s split from the Conservatives — there is strong support among both the Liberal government and the opposition Conservatives for protecting the dairy industry.
Access to the Canadian dairy market has been somewhat of an irritant in past trade negotiations.
From the beginning, supply-managed commodities were protected by tariffs, but some product has been allowed in (based on historical import shares) using import quotas. Products coming in under these import quotas are not subject to the high tariffs. The U.S. also uses import quotas and high tariffs to protect its dairy and other industries.
Canada has opened access for others
As part of other new trade agreements, Canada has provided additional access (through import quotas) to the market.
The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union provided for additional access for European dairy products. The Trans Pacific Partnership (TPP) agreement also had provisions for additional market access — including the U.S. market, until the Trump administration withdrew from TPP.
Dairy became a specific irritant early in the Trump administration.
Shifting demand for milk components meant surpluses for milk protein, used to create a product called diafiltered milk. Because it’s a new product, U.S. diafiltered milk is not covered under previous trade agreements. This meant it could come in to Canadian processors, particularly cheese manufacturers, tariff-free.
In retaliation, Canadian milk protein producers first lobbied the government for protection and when none was forthcoming, changed pricing to protect their market. That in turn caused disruption in some U.S. markets — particularly in Wisconsin, an important state for Trump politically.
Even with the decreased volume in diafiltered milk, the U.S. still has an export surplus with Canada in dairy products. Regardless, it appears that this issue is a particular irritant for Trump.
Prime Minister Trudeau is being so indignant, bringing up the relationship that the U.S. and Canada had over the many years and all sorts of other things…but he doesn’t bring up the fact that they charge us up to 300% on dairy — hurting our Farmers, killing our Agriculture!
Over-production, low prices
The U.S. dairy industry, like many others around the world, is struggling with over-production and low prices. The U.S. also has a number of programs in place to support the dairy industry, which would need to be taken into consideration in any NAFTA negotiations around dairy trade.
The irony is the structure of some of the U.S. dairy support programs may actually be contributing to the over-production — surplus products are bought to support prices, which sends a signal to keep producing too much.
Completely open trade with Canada will not solve the issues facing the U.S. dairy industry, not least because the Canadian market is much smaller than the U.S. domestic market.
In the end, Canada is unlikely to yield on supply management. If a concession is made, it is likely to be in increased access. Canada had already provided an increase in access in the TPP negotiations.
This would seem to be an area of potential concession that would provide Trump with a “win” for farmers and allow the Canadians to sustain their domestic program. It would not be without pain for the Canadian industry, but may be the path to an agreement.
The final chapter of these lengthy NAFTA talks will come down to one key point: Is compromise possible?
This was also published on the conversation.com
Restaurants are playing an increasingly important role in the food culture of North Americans.
In the United States, food prepared outside the home represents more than 50 per cent of the food dollar, or more than US$800 billion a year.
Canadians spend $80 billion annually in restaurants, spending almost 30 per cent of their food dollars in restaurants. They also buy a lot of prepared food for consumption at home.
But the rate of growth in restaurant spending is greater than it is for stores. This spending has an impact on the food market in a variety of ways. Most importantly, however, restaurants are changing how we think about food and what we choose to eat.
Restaurants make choices for consumers. They choose menu items and they decide how to prepare those items.
Grocery stores want to give consumers as much choice and variety as possible, but this causes issues for restaurants.
In a grocery store, for example, there may be many choices of eggs (white, brown, different sizes, organic, high Omega-3, free-run, free-range and cage-free), breakfast sausages (beef, pork, turkey, enhanced-animal welfare, reduced antibiotic use, low sodium, mild or spicy) and English muffins (regular, whole wheat, multigrain, gluten-free and low sodium).
By comparison, in most restaurants you only have one or two options for a breakfast sandwich — likely with or without the sausage. Not only do restaurants make the choices for us, they communicate the value of those choices and can raise awareness of issues.
Nonetheless, it was quick-service restaurants like McDonald’s and Tim Hortons that drove animal welfare discussions with respect to layer hens and eggs. This may, to a degree, have been driven by activist pressure, but was not due to consumer demands.
Fast-food restaurants have helped affect change
Large restaurant chains drive significant volumes of business. Their demands can drive changes in how food is produced by creating the critical mass of demand to justify those changes.
Restaurants also have a better opportunity to communicate their choices to consumers than retailers do. In a full-service restaurant, the server can describe important attributes of the dishes on offer; furthermore, a limited menu provides the opportunity to highlight those special qualities.
Chain restaurants, particularly fast-food outlets, advertise and differentiate on those attributes and raise them in the consciousness of Canadians (for example, A&W and its commitment to antibiotic-free meats). Through this communication, restaurants are not only attracting new customers, they’re having an impact on the choices people make when they grocery shop too.
Like food retail, restaurants are low-margin businesses. Rising costs in food, labour and rent are forcing restaurants to look for cost savings in different areas. This has driven a shift, first to lesser cuts of meat (the biggest expense for most restaurants) and smaller portions, and now often to alternate sources of protein.
This helps to drive changing perceptions of plant-based proteins and even insect proteins.
Read more: Less meat, more bugs in our dietary future
The lines between food retail and restaurants are increasingly being blurred, which extends the influence of the “restaurant experience.”
Food kits gaining popularity
Retailers and online services are increasingly offering meal kits that come completely portioned and ready to prepare. These allow consumers to have the comfort and convenience of eating at home while also enjoying a more sophisticated meal experience.
These kits usually come with premium attributes (for example, ingredients with enhanced welfare and sustainable production attributes) that also increase awareness. Some food retailers are even opening restaurants (often termed grocerants) to offer more options for customers.
Restaurant food delivery is also becoming more common. Uber Eats, SkipTheDishes and other services offer delivery from a much broader range of choices than the traditional pizza and Chinese food.
This has not been without its hiccups. Some food doesn’t travel well, and using a third-party delivery service eliminates the restaurant’s control over quality and, therefore, the complete consumer experience.
Retail food delivery or order pickup is also becoming more common. We heard a lot about Amazon’s entry into the market and the acquisition of Whole Foods but there are other well-established players around, and new ones entering the market too.
Grocery delivery is difficult, particularly in the early days as routing and timing are complicated. This has lead more companies to follow the “click-and-collect” model where consumers order online and pick up their groceries at the store themselves. This also allows consumers to buy some of the fresh produce separately.
The desire for variety and convenience is increasing the role that restaurants are playing in our food experience. More importantly, though, restaurants are also playing an increasing role in how we think about food.
Restaurants, in fact, matter more than ever.
A piece that my colleague Al Weersink and I published in the Conversation.
Biologically speaking, humans are omnivores and we like to eat a variety of things. There is increasing interest in all sorts of alternative sources of protein as we diversify our diets. This trend is accelerating in 2018.
According to Nielsen, the consumer analytics company, the proportion of Canadians identifying as vegetarian and vegan is still relatively small (six per cent and two per cent respectively), but 43 per cent of Canadians say they’re planning to get more plant-based proteins into their diets. That’s higher than both the United States and global average.
This is coupled with an 18 per cent reduction in beef consumption and an 11 per cent decrease in pork consumption over the past decade, according to the Nielsen data.
In the U.S., meantime, plant-based food sales grew by almost 15 per cent from July 2016 to June 2017.
We are being offered more variety in response to these trends. It’s a phenomenon driven by a wide range of concerns over our health, the environment, animal welfare — and simply an increasing desire for variety. It’s clear that consumers are reducing meat consumption (flexitarianism) or, to a smaller degree, not eating meat at all (vegetarianism, veganism, lacto-ovo vegetarianism and pescatarianism).
While the science continues to be unclear about the health impacts of meat consumption, it is clear that there’s a move towards eating less meat. The new, not-yet-finalized Canada Food Guide recommends moving to a more plant-based diet. But if people reduce their intake of meat, they will need to find protein elsewhere.
Animals emit lots of methane
A common critique of meat is that livestock production is environmentally unsustainable. In addition to the resources required to produce meat, there is also concern about the emissions from farm animals, particularly cows.
While the absolute impact depends on the livestock type — beef is considered more problematic than chicken due to both emissions and the amount of grain required per kilogram of meat produced — and the specific production system, concern over environmental impact will continue to motivate some to cut back on meat consumption.
Furthermore, some consumers think that raising animals for human consumption is unethical, and are choosing to stop eating meat altogether.
Even without concern for the other factors, there is also a trend to increased variety and choice. Baby Boomers, in particular, have more time and are experimenting more with food.
Restaurants are working hard to offer more choice, profitably, as meat prices increase. They also are seeing the early trend of reduced meat consumption and anticipating an opportunity. A demand for alternate proteins exists in grocery stores as well.
Plant-based proteins are the primary alternative. These are most often soy protein or pulses. Pulses are the dried seeds of legumes and the most common edible ones are dried peas, dried beans, chickpeas and lentils.
These products are appealing as they are high in protein and fibre but low in fat. While that makes for a healthier product, it does make them less desirable for some consumers.
Lab meat being developed
In efforts to replicate the meat experience, several companies are developing plant-based meat analogs. They are building “burgers” that mimic the colour, texture, juiciness and taste of a beef burger. The Impossible Burger is one that’s received a lot of attention. Several of these products are on restaurant menus and grocery store shelves in the United States and Canada already.
Companies are also developing the technology to culture meat, a process in which meat protein is grown in a laboratory without a live animal.
This technology exists today and costs are still high, but developers are optimistic that cost reductions will continue. Another drawback of the current technology is that it produces a ground beef analog rather than the long muscle fibres that comprise premium cuts of beef.
Insect protein is another area with the potential for dramatic growth. The “ick!” factor has constrained development in North America, but there are parts of the world where insects represent a significant protein source.
Insects have appeal because they grow quickly and efficiently. Also, food that would otherwise be wasted can be used to raise insects.
The development of products such as insect “flour,” where the source is not recognizable, may make insect protein more appealing. President’s Choice just launched a cricket powder as part of its product line. Insect protein is clearly entering the mainstream.
The bread price-fixing scandal has garnered Canada’s biggest grocery chain a lot of negative media attention.
A recent survey from Dalhousie University suggested that consumer trust in Loblaws has fallen by 10 per cent since the announcement of the bread price-fixing issue.
But will the scandal have a sustained negative impact on Loblaws?
While the company may face civil suits at some point, there is no risk of prosecution under the whistle-blower provisions of Canada’s competition regulations. And so the outstanding question is whether the decline in consumer trust results in significant losses in sales and market share to Loblaws.
Several factors suggest perhaps not.
All retailers painted with same brush
It’s clear that consumers are becoming increasingly distrustful of business generally. They feel in many cases that bad behaviour is the norm, and aren’t surprised when stories like the Loblaws price-fixing emerge.
This is particularly true in this case because Loblaws has claimed (and preliminary findings from the Competition Bureau suggest) that many, but not all, Canadian retailers were involved in the bread scheme.
The Dalhousie study suggested that on average, trust went down for all Canadian retailers following the scandal, although trust in Loblaws declined the most. And so if consumers believe everyone cheats, there’s little motivation to switch stores. Food is a staple. We can’t choose to forego groceries.
It’s worth noting the case of Volkswagen. The emissions scandal that engulfed the German company in 2015 was a significant challenge. Volkswagen paid huge fines and had to retrofit millions of cars. Despite that, the company has seen unit sales growth of 3.8 per cent in 2016 and 4.3 per cent in 2017.
There were financial challenges, and Volkswagen performed in some markets better than others, but customers aren’t staying away in droves despite the negative media attention and bad corporate behaviour.
Who is Loblaws anyway?
Another factor that will likely buffer the Loblaws parent company is that many customers likely shop at Loblaws without knowing it.
Loblaws sells food under many different banners including Real Canadian Superstore, Zehrs, Provigo, Fortino’s, No Frills and Shoppers Drug Mart. Many customers likely shop at a favourite store without making an explicit connection to the Loblaws name.
That means even those customers who are inclined to punish Loblaws might not even know they are shopping there.
Loblaws has reportedly distributed as much as $150 million in gift cards (in $25 increments) as part of the campaign to win back public trust in the wake of the price-fixing revelations. These gift cards need to be spent in Loblaws stores. It will bring customers back into the store and they will likely spend more than the $25 they’re entitled to via the gift cards.
There will also be people who have never shopped at a Loblaws store who applied for gift cards. Rival grocery chain Sobeys has said it expects to feel an impact from the distribution of the gift cards.
Once again, we would expect customers who may have never set foot in a Loblaws store before to spend more than the gift card. It’s even possible that they’ll enjoy shopping at Loblaws so much that they’ll switch stores after spending the card.
That’s not to say Loblaws won’t feel an impact from the price-fixing scandal. They distributed millions of dollars in gift cards. Some of them will not be redeemed — that’s always true of gift cards.
Those that are redeemed will not cost Loblaws the full $150 million as they must be spent in Loblaws stores. That means that, although Loblaws will lose the margin they would have made on the sales, the actual out-of-pocket cost of the card is less than the face value of the card. There also remains the real threat of class-action lawsuits.
In the long run, however, it doesn’t seem likely that Loblaws will suffer significant losses in food market share. The price-fixing announcement came very late in the year, so fourth-quarter results will not provide much insight.
It’s worth noting that same-store food sales were up 0.5 per cent over the previous year in the fourth quarter. While third-quarter results showed a 1.5 per cent increase over the previous year, it does not appear that there was a dramatic flight from shopping at Loblaws in the immediate aftermath of the announcement.
Loblaws’ first-quarter 2018 results will be telling. But the market also seems to believe Loblaws will weather the price-fixing storm. Share price did not decline significantly after the announcement, and a late January drop was attributed to generic drug-pricing reform and the cost of minimum wage increases.
There are still challenges in the market. Stiff competition in the grocery sector still exists and will increase if and when online sales grow. Other factors will continue to keep Loblaws on its toes, but the price-fixing scandal might not be among them.
This is a piece that I wrote with my colleague John Cranfield in the Conversation.
Will taxing meat products based on their carbon footprint reduce greenhouse gas (GHG) emissions and improve public health? The answer is maybe, but not notably — and it will come with significant costs.
The idea is that if meat is more expensive, consumers will buy less of it. In turn, when faced with reduced consumption, farmers will produce less cattle.
Not all meat production produces the same volume of emissions. Since cows produce a lot of methane (a greenhouse gas), fewer cows should mean less methane, which in turn should help lower GHG emissions. Pigs and chickens don’t spew methane the way cows do, but there are also the emissions associated with feeding them, as well as with the decomposition of manure.
While it’s clear we need to proactively reduce GHG emissions globally, we believe the emissions tax approach is unlikely to achieve success.
It will likely increase food prices for consumers and decrease the prices farmers charge for their products, but it’s unlikely to lower meat consumption significantly and therefore unlikely to lower GHG emissions from the livestock sector. There may be other detrimental impacts to taxation too.
Price hikes don’t usually curb consumption
Food consumption is not as strongly linked to price as one might think. Changes in consumption of food are typically much smaller than changes in the price consumers face in the grocery store. This is a phenomenon that has been recognized and measured for decades.
We would need to implement huge taxes to achieve a small decrease in consumption. As an example, the study in the Nature Climate Change journal suggests a 40 per cent tax on beef would only reduce beef consumption by 15 per cent.
Because taxes on food at the retail level tend to raise the prices paid by consumers, it’s also worth noting that any increase in the price of meat would tend to affect low-income consumers more than more affluent consumers. Low-income consumers would pay relatively more than the rich.
We also need to consider substitution effects. While a high tax on beef and other meats will lower beef consumption somewhat, it may also lead to economizing by consumers through increased consumption of lower quality or more highly processed cuts of meat.
This could actually increase the relative prices of these cuts, making the negative impact of the tax on lower-income consumers even stronger, and would undermine some of the suggested health benefits.
All cattle are not raised equally
It’s also important to recognize that different types of cattle production create different volumes of emissions.
There is a suggestion that any tax on meat should reflect the production system. Those that raise cattle on grasslands or in pastures, for example, would have lower taxes than cattle raised using intensive production systems, like those used throughout North America, which create higher emissions.
While cattle in North America spend their early life on pasture, most beef cattle are finished in feedlots where they are grouped and fed high-energy grain rations to efficiently produce the preferred texture and taste of beef.
A tax based on how cattle are raised, however, would be both politically and logistically difficult.
If grassland and pasture rearing of cattle is favoured because of lower GHG emissions, we could see significant deforestation in those countries that produce beef extensively, but not a substantial reduction in consumption as desired.
We could end up in a situation where many differences in production practices, even within countries, create different emissions estimates and therefore cattle producers would seek different tax levels.
There’s also a risk that a meat tax would reduce the incentive to initiate research and development that could help cut emissions within the sector.
Examples of such R&D include efforts to improve the feed efficiency in cattle production. At the farm level, feeding more cattle on a forage-heavy pasture diet could increase the costs of producing cattle and change the characteristics of the beef while eroding the incentive to adopt climate-friendlier production practices.
It’s worth noting that the United Nations Food and Agriculture Organization has said that emissions could be reduced by 30 per cent today if current best practices were broadly implemented. This is beyond the impact of a 40 per cent tax. The incentive to adopt these best practices would be removed by the implementation of a tax.
Progress can be made
As experts in food and agriculture economics, we agree that reduced GHG emissions are important for the future of humanity. We also believe that we are likely to substitute plant or insect proteins or cultured meats for traditional meat products over time.
Even if it were possible to get broad-based agreement for a global (or even just a Canadian) tax on meat, however, it is important to look not only at whether these efforts would reduce GHGs, but also at the unintended consequences of these efforts.
In the case of the proposed meat tax, it is not only unlikely to achieve the intended outcome, it is equally likely to create a spate of unintended consequences that would negatively affect not just cattle producers, but also consumers.
A piece from the Conversation Canada that I co-authored with colleagues Alfons Weersink and Bruce McAdams.
Food is increasingly in the day-to-day consciousness of Canadians. Consumers are hearing more about food in the media and in the broader conversation.
They’re also seeking more information about their food, including where it comes from and how it’s produced. New issues of interest regularly emerge.
Here are a number of key trends you can expect to be in the forefront for 2018:
Increasing choice and micro-markets for food
As consumers are learning more about food, different attributes are becoming more important for various individuals. Food is becoming less a commodity and more a specialized, individual choice.
Producers and processors are responding to these evolving demands by offering more choices and niche products. There are also increasing choices on where food can be purchased — from smaller-footprint neighbourhood shops to big-box stores.
The challenge becomes balancing the costs of choice and the value that choice brings. Retailers, food services, processors and producers need to determine which products and services to develop and offer, as well as asking the question: “How much choice do consumers really want?”
There are significant supply-chain implications, both positive and negative, arising from providing more variety. Do consumers want more choice of standard food products, or do they want entirely different foodstuffs?
The rise of alternate proteins
On that front, there is increasing interest in alternate sources of protein. Nielsen, the global data measurement company, reports that 43 per cent of Canadians are trying to get more plant-based proteins into their diet.
With only six per cent of Canadians identifying as vegetarian and two per cent as vegan, this 43 per cent represents a significant portion of the population determined to eat less meat. Indeed, we’ve seen a 25 per cent decrease in red meat demand over the past decade.
The phenomenon is driven by increasing concern over the health effects of eating too much meat as well as the environmental impact of meat production. While the science on both issues remains contentious, it’s clear that consumers are eating less meat or, to a smaller degree, not eating meat at all.
That’s meant an increase in demand for plant-based proteins, insect proteins and cultured meats. We’ll continue to see growth in this area as more products become available in both retail and food services.
Antibiotic use in meat production
There’s been a lot of discussion in Canada about animal welfare over the past five years.
The next issue we expect will get substantial attention is antibiotic use in meat production. Its use has animal welfare implications, but there are also a wide range of other potential repercussions that make it a much more complex issue than animal welfare.
The World Health Organization has called for a reduction in antibiotic use in meat production, particularly in healthy animals.
Reducing the use of antibiotics, particularly those used in human medicine, is important. But the complete removal of antibiotics from livestock production could have significant negative implications for animal health and welfare. Going forward, great care needs to be taken to strike the right balance among human health needs, consumer preference and animal health.
The appropriate balance can be undermined by opportunistic marketing with over-simplistic taglines on food products regarding antibiotic use.
Restaurants matter more
Canadians are spending an increasing proportion of their food dollar outside of the home. We spend $80 billion a year in restaurants, and restaurant spending is growing more quickly than grocery store spending.
Food delivery services and meal packages are blurring the lines between restaurants and grocery stores. Visits to restaurants are more frequent, and dining establishments influence food choices as we shop. Their ability to communicate directly with consumers through personal interactions, mass marketing and social media means food service is shaping our thinking about food and the choices we make in grocery stores.
For example, consumers at the grocery store can choose between eggs with attributes ranging from conventional to omega-3 to organic to free range, but the consumer buying an egg sandwich from a fast-food outlet has no choice about the type of egg used — that decision has been made by the restaurant.
However, the restaurant serving chèvre omelets made from “cage-free” eggs and goats free to roam and graze at will can create demand for those eggs and that chèvre at the retail level.
Minimum wage increases
Substantial minimum wage increases are coming in both Alberta and Ontario. Other provinces, most notably British Columbia, have indicated that they intend to raise theirs in the years to come.
Minimum wage increases have the potential to have a major impact in the food sector.
Restaurants employ more than 1.2 million people in Canada, and most of them work at or close to minimum wage. Food retail employs more than 500,000 people in Canada, and again, most of these employees work for minimum wage. Substantial increases in minimum wages will push companies to change how they function, and could reduce overall employment.
While many farm activities will be exempt from minimum wage requirements, higher wages in other sectors could make an already difficult labour situation worse on farms. Farms relying heavily on manual labour, such as fruit and vegetable operations, will feel the impacts of higher wage costs, which therefore could result in more mechanization and automation.
We expect an annual increase in food prices overall of two per cent to 2.5 per cent in 2018 (similar to 2017). Price increases for specific products cause consternation, but consumers can often offset rising prices by modifying purchases in the short run. A number of factorscan cause unexpected fluctuations in prices, most notably extreme weather events and exchange rate fluctuations.
In the absence of these factors, prices will generally increase at the rate stated above although there is considerable volatility between product and within the year.