The high cost of doing food business in Canada

With Tuesday’s release of new data from Statistics Canada, the conclusion is unequivocal: for the second consecutive month, Canada is posting the highest food inflation rate among G7 countries. Food inflation now stands at 7.3%.

Beef, nuts, pork, and even chicken are between 5% and 7% more expensive than a year ago. The only relief comes from eggs and fresh fruit, which are cheaper on a year-over-year basis.

Meanwhile, the United States — despite pursuing an aggressive tariff policy affecting numerous imported goods — is reporting food inflation of 2.9%, less than half of Canada’s rate. 

READ: Inflation ticks down to 2.3% in January amid lower gas prices: StatCan

Admittedly, one year ago Canada was benefiting from a temporary GST holiday, which artificially suppressed the index. However, even after adjusting for that statistical distortion, our estimates suggest Canada’s food inflation would still have been approximately 6.3%, keeping it at the top of the G7.

Yet as recently as last week, some federal ministers attributed rising food prices primarily to climate change. That explanation is becoming overly convenient. Yes, climate conditions influence certain agricultural prices. But for several years now, they have not been the primary driver of Canada’s food inflation.

The issue is structural.

Since 2008, the food component of the Consumer Price Index has consistently grown faster than the overall CPI. This tells us that the challenge is neither cyclical nor temporary. It reflects deeper issues of productivity, competitiveness, and the structural configuration of our agri-food economy.

Several factors contribute to this dynamic:

• Interprovincial trade barriers, including aspects of supply management where quota administration is provincially governed;
• Multiple layers of taxation affecting the food chain, including industrial carbon pricing;
• Fragile logistics systems at the port, rail, and trucking levels;
• Aging infrastructure;
• A generally smaller and less diversified business ecosystem compared to our global competitors, limiting sourcing flexibility;
• A complex and costly regulatory environment, including labeling requirements and administrative compliance burdens.

Temporary measures have also played a role. Counter-tariffs and the GST holiday introduced additional distortions — whether through opportunistic price adjustments or the need for firms to absorb policy-induced costs. These effects may not be visible to consumers, but they are economically predictable.

READ: Ottawa: Stop sending cheques to fight grocery prices. End the grocer blackout

Individually, each factor may appear marginal. Collectively, however, they systematically increase the cost of doing business in Canada — and those costs inevitably flow through to consumers.

In this context, the enhanced GST credit, valued at nearly $14 billion and already built into the federal budget, adds further demand-side pressure. Politically, it is difficult to oppose direct support for vulnerable households. Economically, however, any significant fiscal expansion not accompanied by productivity gains carries inflationary consequences.

Food inflation may decelerate in February. But a slowdown in inflation does not mean falling prices. It simply means prices are rising more slowly.

Until we acknowledge that Canada’s food affordability challenge is fundamentally a productivity and competitiveness problem, we will continue treating symptoms rather than causes — and repeating the same policy mistakes.