Earlier this month, we documented the surging price of fresh produce in Canada, where the plunging loonie is creating a nightmare for shoppers in grocery aisles across the country.
Because Canada imports more than three quarters of its fresh fruits and vegetables, the inexorable decline of the Canadian dollar has driven up prices on everything from cucumbers to cauliflower to tomatoes, and as we showed via a series of tweets from incredulous supermarket shoppers, Canadians are not pleased.
“Three bucks. For a cucumber,” one shopper wrote.
“Had a similar reaction when I saw the price of cauliflower,” another said. “Welcome to the future..”
Yes, “welcome to the future” Canada, because with oil prices set to remain in the doldrums for the foreseeable future, any long-lasting respite for the loonie is probably not in the cards, despite BOC governor Stephen Poloz’s efforts to keep the currency anchored by eschewing the rate cuts needed to keep what remains of the country’s oil patch in business.
On Friday, we got confirmation that all Canadians, not just those in the deep north, are indeed suffering under double-digit inflation at the supermarket when Statistics Canada said the price of fresh fruit has skyrocketed by 12.4% since the end of 2014 while fresh vegetables are up a staggering 14.4%.
“I’ve never seen it that high. It’s usually $6.99, maybe $8 but that seems like quite a jump,” said Sheri Paolatto, a Crossroads Market shopper who was astonished to discover thath a bag of grapefruit now costs nearly $15.
“Tomatoes trade the same as the TSX. It’s a commodity, too, and all produce is traded in U.S. dollars,” Jason Wiebe, president of Chongo’s Market at the Crossroads Farmers Market remarked. “In November, the retail cost of tomatoes on the vine was $1.99 a pound. Now I have to sell the same box at $3.99 pound,” he added.
(Jason Wiebe and his tomatoes)
“Prices for food purchased from stores were up 4.1% year over year in December, following a 3.7% increase the previous month,” Statistics Canada’s report reads. “The acceleration was mainly attributable to the fresh vegetables and fresh fruit indexes, which rose more on a year-over-year basis in December than in the previous month.”
As a reminder, this all comes courtesy of falling crude prices and the attendant death of the Canadian oil patch. The plunging loonie has added to the woes of a populace already coping with a sharply decelerating economy that, in the hardest hit areas like Alberta, has cause violent crime to spike, suicide rates to soar, and food bank usage to climb by more than a third.
Paradoxically, the only thing that can save the country’s oil producers is a lower CAD. As it stands, the CAD-denominated price of WCS sits about a dollar above the marginal cost of production. Because Canada’s producers take in USD for their product but pay their operational costs in CAD, a slumping loonie helps keep the companies in business and thus forestalls even more O&G job losses on top of the 100,000 positions eliminated last year.
But the CAD’s decline also has an impact on consumer confidence and thus on consumer spending.
Put simply: the BOC is damned if it does and damned if it doesn’t.
As for Canadians who enjoy eating fresh fruit and vegetables, the abovementioned Jason Wiebe has some advice: learn to love potatoes.
“We have a lot more root vegetables being bought. The things that are local and haven’t been impacted by the low dollar, people are making those switch decisions. They’re buying potatoes and carrots instead of guava and mango,” Wiebe told the Calgary Herald.
We’ll close with a quote from ATB Financial’s chief economist Todd Hirsh who notes that things have likely gotten worse since Statistics Canada’s assessment, which means Canadians looking to retain the right to eat tomatoes in January need to be prepared to fork it over (food pun not intended):
“Going forward I think we’ll see even higher upward pressure on imported fruits and vegetables. If not for weather conditions, certainly that low Canadian dollar will affect it. Because the numbers we’re talking about today are from December and now in January we’re almost five to six per cent lower on that dollar….If people insist on eating fresh tomatoes and pineapple in January, they’ll be forced to pay for it.”