Food prices in Canada have been rising at a faster rate than overall inflation for the past several years. In fact, food prices are 30 per cent higher than they were a decade ago.
In the face of this pressure, consumers are increasingly worried about the impact of the war in Iran on food prices. While there is currently a ceasefire in place, it appears fragile, and oil and fertilizer prices will be slow to fall.
The conflict will undoubtedly have an impact food prices, but in the short term it will likely be fairly small. If the disruption lasts longer, we could start to see more significant price increases.
Unlike previous shocks, Iran is not a major food exporter, and no Canadian food imports pass through the Strait of Hormuz. Instead, any impact on food prices will come indirectly through rising petroleum prices driven by uncertainty around oil infrastructure in the Middle East and disruptions to the strait.
Approximately 20 per cent of the world’s oil moves through the strait, and the loss of that flow has dramatically increased fuel prices. Oil is currently trading above US$100 per barrel, up from under $60 at the end of January.
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