The price of food inevitably "volatile"

Published: 17 April 2024

From bad weather to global conflicts, and even the breakdown of supply chains, food prices are subject to unpredictable variations.

Here's a look at what's been shaking up the food market in recent years.

Climate uncertainties

"You have to understand that our food prices have always been naturally low, because our food chain was quite efficient and predictable," agronomist and economist Pascal Thériault, McGill Farm Management and Technology Program Director, told le Soleil.

The picture has changed, however, as climate change creates uncertainty, he adds.

"We're going to continue to see a lot of volatility [in prices], because there's a cost to keeping every product on every shelf in every chain all the time," says the agro-economist.

A domino effect

Other unique factors, such as the conflict in Ukraine, are also having an effect.

This major sunflower oil producer had to turn off the floodgates as soon as the Russian invasion began in 2022. "There are plenty of countries that no longer had access. They had to turn to other vegetable oils. This is putting pressure on prices," says Mr. Thériault.

In the case of olive oil, demand has increased while harvests have been setback by the forest fires in Europe last summer.

The domino effect even extended to the price of butter.

"We often went to vegetable oils - to margarine - because they were cheaper than butter. But the price of butter went up, because the price of fat went up globally," explains Mr. Thériault.

Curbing exports

Political decisions to curb exports in response to rising prices in countries that produce staples to ensure national supply, like India's ban on exporting certain rice varieties, have also become more frequent.

This can destabilize the market, pushing international prices even higher by limiting supply.

The example of beef

For Pascal Thériault, beef prices illustrate how a one-off event affects market prices over the long term.

When grain prices soar due to poor harvests, beef producers reduce the size of their herds to keep feed costs down, explains the agro-economist.

"We're seeing a lot of variations in beef prices because of this phenomenon," he says.

It takes several months to close the gap between supply and demand, once grain prices regain some semblance of equilibrium. When a producer decides to add cattle to his herd, it takes about 24 months for the calves to reach market weight, says Mr. Thériault.

"For 24 months, the price of grain will have an impact on the price of beef," he adds.

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