Food inflation has been tame recently. That might not last

Canadian food inflation has been surprisingly subdued in recent months, though it often doesn’t feel that way in the grocery aisle. But even as the pace of food price increases cools for consumers, the farmers who produce that food face spiralling costs that could bring that relief to an end.

Total farm input costs, which reflect prices for everything farm operators need to run their business, soared more than 11 per cent in the second quarter compared with the year before, according to Statistics Canada. Only twice in the past 25 years have farm costs risen faster annually: in late 2008, when inflation-adjusted oil prices hit their highest levels ever, and in early 2022, when commodity prices surged after Russia’s invasion of Ukraine and the breakdown of global supply chains.

The two biggest costs driving the latest surge, not surprisingly, are farm machinery fuel costs – which largely mean diesel – and fertilizer prices, both of which reflect fallout from U.S. President Donald Trump’s war with Iran.

Farm input costs can bounce around a lot, but over time they tend to foreshadow faster food price inflation. And yet for the time being, that link is weak.

In August, the last month for which Statscan has released consumer price data, annual food inflation slowed to 2.8 per cent, the third straight monthly slowdown and the slowest pace since early 2024.

Statscan’s farm input numbers only cover up to the second quarter of the year, so they represent a snapshot of farm costs from several months ago. But the trajectory is clearly pushing higher, and with diesel prices near their highest levels ever, the pressure on farmers, and hence food prices, is only rising.

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