Don’t let the grocery giants fool you: food price inflation is not the farmer’s fault.
Paying farmers a fair share is not inflationary, corporate greed is.
Canadians are upset about higher grocery bills, but most farmer incomes have not kept up with inflation. So what is driving prices up at the grocery stores?
Many organizations and consumers point to corporate greed as the cause. While Canadians have had to spend more for less across a variety of commodities since 2020, inflation in the retail grocery sector continues to be higher than in other sectors.
Retail grocery companies’ revenues increased despite a decrease in the volume of food purchased by Canadians. Canadian retail grocers continue to see higher profit margins compared with pre-pandemic levels. Grocers are able to take advantage of inflationary periods to increase profits because of the market power they have: five grocery chains control 75% of the market. Shoppers have few choices, making it easier for retailers to raise prices without losing customers.
In response to a Parliamentary study on rising grocery prices, the grocery chains’ lobby group, the Retail Council of Canada, claimed that: “The combined roles of cost spikes for feed, fuel, and fertilizer, compounded by supply chain disruptions, labour shortages and climate events have been the real drivers of food price inflation and higher costs.”
If that is true, prices paid to farmers should have increased more than the general rate of inflation. Data compiled by the National Farmers Union shows that they have not.
Over the past 30 years the retail price of bread has increased 50%, while Canadian farmers have not seen an equivalent increase in the price of the wheat that they sell at the elevator. The values of farm products have decreased relative to other consumer items. It takes more bushels of wheat to buy a pair of work boots or a house than it did fifty years ago. For example, a top-line, base model of a pickup truck was equivalent to about 2,000 bushels of wheat in 1976. Today, that truck would cost the farmer 7,000 bushels.
This decline in relative value is apparent among other commodities. The retail price of ground beef has doubled since 1994 while the price farmers receive for cull cows used to make hamburgers has increased by just 40%. While the farmers’ price for steers is increasing, the increase in the retail price of steak continues to outpace growth in farm prices. The farm price of hogs compared to bacon and pork chops shows a similar pattern. For all these commodities, the consumer is paying more while the farmer is receiving less. More importantly, beef and pork markets are highly volatile—prices for farmers have crashed several times in the last two decades.
However, supply management, which governs the production of dairy, eggs, chicken, and turkey provides more stability and better outcomes for both farmers and consumers.
Retail prices for milk have increased more slowly than other grocery prices. Compared to other products like bread and ground beef, milk prices rose by only 27% over the last thirty years. When you buy milk at the grocery store, 30% of what you pay supports Canadian farmers – the farmers’ share of the consumer’s dairy dollar has remained stable. This is true for eggs and chicken as well, where farmers’ also receive roughly a third of the retail price. For supply managed products, consumer prices have risen slower than for other foods, while the farmer’s share has remained consistent, even though retailers set their own prices after. Farmers have no control over prices after the product has left their farms.
Supply management shows it is possible to provide a fair share to farmers and a fair price for consumers. Under supply management, a formula using data from a survey of actual farmers’ production is used to determine a price that covers production costs, ensuring farmers can stay in business producing the food Canadian consumers need.
Production discipline ensures farmers produce enough – and not too much – of their product according to their share of the national quota. Import controls make sure that excess product does not flood the market, depress prices, and lead to waste. Each province has its own share of the national quota managed by its own marketing boards. This means that processing facilities for dairy, egg, chicken, and turkey products are distributed across Canada, guaranteeing that consumers have local products no matter where they live. The high quality and predictability of supply keeps processing and distribution costs down too.
In non-supply managed sectors prices are not determined by their cost of production. Traders buy from farmers at the lowest price possible. Because individual farmers do not have bargaining power they are exposed to big companies’ market power. These companies keep commodity prices down in order to keep their profits up. Grain, beef and pork farmers are at the mercy of the margin-maximizing “buy low – sell high” strategies of commodity traders. Increasing market power allows ever-larger traders to take a bigger bite out of food processors’ bottom line, who in turn pass on this cost increase to wholesalers, and then to retailers.
Supply management keeps food dollars in Canada and protects against tariffs or currency exchange rate shocks. It supports fair incomes for farmers, provides for processing efficiency, and ensures consumers have reliable access to high-quality Canadian food at fair prices.
Farm prices are not driving grocery costs, corporate greed is. Farmers deserve a fair share of food prices. The success of supply management provides clear evidence that this is possible.
