Heavy competition and low inflation will keep retail food prices low in 2014, according to a new report.
The University of Guelph’s annual Food Price Index, released Tuesday, says food prices will increase between 0.3% and 2.6%.
Food prices so far this year have averaged a 1.2% hike, less than the university’s anticipated increase for 2013 of between 1.5% and 3.5%
Lower price hikes this year were mainly the result of low inflation and a fierce rivalry among food retailers.
Dr. Sylvain Charlebois, lead author of the report, said that with Target opening more than 100 stores in Canada this year, existing retailers like Walmart and Loblaw kept their prices especially low.
He expects more of the same in 2014. “The landscape in Canada has become very, very competitive,” he told Canadian Grocer.
Food prices could be driven up by inflation, of course. But Charlebois says he doesn’t expect the Bank of Canada to raise interest rates until at least next summer.
If that were to happen, the effects on food prices would not be felt until likely the end of the year or early 2015, he said.
Some food prices will rise more than others next year. Charlebois expects fish and seafood to see the highest gains–anywhere from 3% to 5%.
Fish prices could rise because there is growing pressure on fisheries for catch. Sustainable seafood initiatives from retailers and consumer demand for sustainable fish will also help drive prices up.
Price expectations for meat, grains and fruits and nuts are “relatively stable” while prices for cheese, milk, frozen vegetables and pasta could fall due to retailer competition.
Overall, the Food Price Index, anticipates the following retail increases for 2014.
Meat: +0.6% to +2.1%
Fish and seafood: +3.0% to +5.0%
Dairy and eggs: -0.6% to +1.5%
Grains: +0.2% to +2.0%
Fruits & nuts: +0.6% to +1.2%
Vegetables: +1.4% to +2.1%
The report also estimated that restaurant food prices could be flat or rise 2% at the most.