Not only does a Competition Bureau food price study lack investigative power, it may be based on an exaggerated premise, according to a UBC food and commodities expert.
One of British Columbia’s leading experts on food prices said a Competition Bureau study of grocery store prices announced Monday is unlikely to bear much fruit because it lacks powers. of execution.
James Vercammen, a food and resource economist at the University of British Columbia, further suggests that rising grocery prices are more a function of supply chain factors than predatory grocer pricing, which will be the focus of the study.
“My view is that inflationary factors essentially work through the supply chain, from the farm level, to food manufacturers, to trucking, to warehousing, to containers, to packaging. ; it kind of happens on its own, and retailers take responsibility for that, because it’s easy to pick on the last person setting the price,” says Vercammen.
The Competition Bureau will examine the extent to which higher grocery prices are a result of competitive dynamics.
“In this study, we will focus on competition in the grocery industry and why prices are so high right now. Some people say it’s because inflation has made it more expensive for grocers to buy the products they sell. Others say grocers are charging higher prices because they don’t face enough competition,” said the bureau, an independent federal law enforcement agency.
Vercammen’s main area of study is commodity prices and he asserts that rising commodity prices are not the primary cause of inflation. In addition, well-anchored inflation expectations also drive prices higher.
“Once you’re convinced inflation is permanent, you demand your price go up, and when everyone does it at the same time, you get those pushes,” Vercammen said.
The office’s market research is not an investigation into a specific allegation of wrongdoing and does not have formal authority to demand information from retailers – which Vercammen says will limit the results of the study even if there were price fixing or competitive factors.
Vercammen said that given the evidence he had that showed grocers weren’t the main source of food price inflation, he wondered to what extent political and public discourse had pressured the office. to conduct the study.
Vercammen noted that Canada’s bread price-fixing scandal still looms large in the public dialogue about grocery store prices. A class action lawsuit against the major retailers was reportedly approved last January and the bureau has yet to close its investigation.
But, Vercammen said, today’s food prices don’t seem to be a function of “greed.”
He notes that large grocers’ profit margins reached about 3.7% during the first phase of the pandemic, when the 10-year average is about 2.5%. And those margins declined in 2022. Vercammen anecdotally suggests that people were simply buying more food from grocery stores in 2020 and 2021 because they were avoiding restaurants.
“Grocers have done well during the pandemic, across the board, and that kind of stuff is reflected in the data. But I don’t see it continuing now; rather it seems to be slowing down,” Vercammen said.
Another indication that grocery price gouging may not be the culprit in Canada is that food inflation is a global phenomenon.
The consumer price index for food in Canada was 10.3% annualized through September 2022 and Vercammen says western states are seeing similar numbers.
Vercammen is part of the Annual Report on Food Prices in Canada, Dalhousie University, University of Guelph, University of Saskatchewan and University of British Columbia.
Last year, the panel predicted food prices would rise 5-7% in 2022.
With inflation worse than expected, Vercammen and his team do not predict a dramatic reduction in rising costs, but rather a slow decline.
“Inflation won’t be as bad as what we see now. I believe we’re peaking, but it’s definitely not going to go down to, you know, 3% to 4%; we’re probably going to hover around that five, six, seven percent level for 2023.
“It’s going to take time, unless we have a big recession and interest rates come down. It can get weird very quickly, so it’s hard for us to predict,” Vercammen said.
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