A reporter recently contacted me to discuss food inflation, an issue that is cropping up in Québec and elsewhere in the world. The reporter’s interest focused mainly on what Québec as a whole and consumers as individuals could do to counter this phenomenon.

The reality is that food inflation is slowly taking hold here and should be more evident in the months to come. Its causes are well-known, from drought in Australia, America’s voracious appetite for corn ethanol, to the higher cost of energy and increased demand for animal protein from emerging countries, such as China. However, the call left me somewhat ill at ease since the questions seemed to imply that food inflation would be a problem in Québec. But let’s not get ahead of ourselves; it’s important that Québec consumers consider all sides of the issue.

Consider the following: in 2006, Québec consumers spent 28% more money on their automobiles than on groceries. Since 1997, car related expenses have risen by 44% while for that same period, grocery costs increased by 16%. Not surprising since the food budget represents less than 12% of Québécois’ overall household expenses. Between us, if you could choose what to take with you on a deserted island, what would you choose, your car or food? Furthermore, in 2006, almost one quarter (25%) of Québec’s household food expenses were spent in restaurants. Seems to me that groceries aren’t a huge financial burden for Québec consumers. Yes it’s true, food inflation may be more difficult to bear for those less fortunate, but as a society we need to work harder in terms of income instead of expenses to improve the lives of those who are indeed in this situation.

Nonetheless, the rise in agricultural and food product prices has been much slower than inflation over the past few years despite increasing household revenues. This situation reflects the significant gains in productivity experienced by the agri-food industry, which in turn transferred those gains to consumers. However, this situation also reflects a problem with chronic overproduction of foodstuffs on the international level, which often meant that prices were below production costs. Western governments had to compensate by implementing a crisis program and subsidies to keep agriculture alive, including the inevitable incentive and equitable sharing problems that will ensue. In truth, a higher grocery bill would bring us closer to the actual price of food.

For consumers susceptible of panicking in the event of such a price hike, there is some hope. In fact, a US recession could have repercussions on China’s growth and on the economy of other emerging countries. This could result in slowing down demand for animal protein, thus reducing the pressure to increase the price of agricultural foodstuffs. Furthermore, a slower economy also means a slow down in raw matter consumption, which could bring about a decrease in energy and fertilizer prices, further reducing the pressure on agricultural foodstuff prices. However, a US recession is usually very bad news for Canada’s economy. Think about it, a higher grocery bill might not be such a bad thing!

The next time you, as a consumer, feel like whining about your rising grocery bill, remember that over all, groceries occupy a very small part of your budget.

As Hippocrates once said “Let food be your medicine…” and if he were alive today he would surely add “… for the future of your car lies in the scrap yard”. All things considered, it’s all relative!

Prof Doyon

Maurice Doyon is an Associate Professor and Graduate Program Chair, Department of Agricultural Economics and Consumer Science, Université Laval. He is also a member of the Centre de Recherche en Économie agroalimentaire (CRÉA) with that same department, auxiliary professor with the University of Maine, associate researcher with the Centre interuniversitaire de recherche en analyse des organisations in Montréal and associate researcher with the Neutraceuticals and Functional Foods Institute (NIAF). Furthermore, he holds a doctorate degree in Applied Economics from Cornell University, as well as a Master’s degree from this same institution. Mr. Doyon has received over fifteen grants and merits throughout his distinguished academic career.