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Global Food Cost Rising

By Bob Ewing     Jul 23, 2007 in World
Consumers can expect to pay more for food as prices around the world increase. there are several reasons why food prices are going up, ethanol production and climate change among them
When you go grocery shopping, are you paying more when you check out? You may be buying the same amount of food and your purchases are similar from week to week but it is possible that the amount you pay is on the rise.
Global food prices are rising and the rise is being attributed to soaring energy costs, weird weather and an ethanol boom.
In Canada food prices are 3.1 per cent higher that they were last year, according to Statistics Canada. Meat and dairy products lead the increase, however, bread, jam, eggs, juice and ice cream prices are being affected.
Canadian chicken and dairy producers are paying higher prices for the feed they use and this is being attributed to the growing ethanol industry.
Ron Morceny is the acting chief of Statistics Canada’s consumer price division and according to Morceny corn and wheat prices are putting an upward pressure on food prices in general and this pressure is being reflected in the consumer cost of meat, for example.
Fruits and vegetables, in particular, have risen over the past week according to a report released by the Bank of Canada.
Canada is not alone in experiencing rising food costs. The United States saw poultry and dairy prices rise as well and across Europe and Asia the cost of food has taken off.
Economic growth causes the demand for food to grow and as people increase their buying power they begin to eat higher up the food chain and this puts pressure on food supply and thus increases prices.
“It's not going to let up any time soon. Short term, it might be weather-related. But longer term, it's growing demand for food in emerging economies, with growing middle classes and purchasing power, and the global demand for ethanol and biodiesel.” Adrienne Warren, senior economist at Bank of Nova Scotia
Oil prices are currently trading at an 11 month high and this increase is effecting energy costs and putting the squeeze on many farmers. Canada will not feel the impact of rising food prices as severely as other countries may.
For one thing, food's not the biggest component of Canada's consumer price index. Food only accounts for 17% of the Canadian Consumer Price Index (CPI) while housing is 27%. For another the Canadian dollar is at a 30 year high ands this will limit the cost of food imports.
The third reason is, when we are talking food, raw materials are not a big part of the cost. According to Warren, only about 20 per cent of the value, of most food products, is actually based on the farm price.
“The basic food cost is a fairly small share of the final retail price of most food goods, and a falling share over time. Advertising, transportation, labour and packaging make up a much bigger component,” Ms. Warren said.
Canadian farmers receive approximately 6.5 cents from the sale of a box of corn flakes which retails for $3.57, according to a 2005 study by Canada's National Farmers Union.
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