The Prices Crisis

Written By Noémi LoPinto

Food and fuel costs are skyrocketing globally, and it won’t be long before Albertans start to feel the pinch. Act now to ease the pain

ALBERTANS HAVE BEEN INSULATED BY A HIGH DOLLAR AND no small amount of good luck when it comes to the price of food and fuel, but our luck is likely to run out. No matter where you think the responsibility lies, consumers have to ready themselves for a sea change, says the vice-president of the Consumers Council of Canada, Eleanor Friedland.

“We’re going to have to learn how to get back to basics,” says Friedland. “Save gasoline, save energy and buy locally. Consumers have to start cooking more meals at home, drive smaller cars at slower speeds and stop buying packaged goods.”

Analysts are predicting a hike in food prices that will make increases in the cost of oil, which topped $133 a barrel this summer, look like small potatoes. Baking products rose 13 per cent in 2008, the steepest rise since 1981. The Organization for Economic Co-operation and Development is projecting similar increases of between 20 and 60 per cent in pork, beef, sugar, wheat and maize over the next 10 years. The organization’s experts predict that butter, oilseed and vegetable oil prices will increase to between 60 and 80 per cent. In 2004 in the United States, wheat sold for $3 a bushel.

It is now worth over $24. Commodities markets have become volatile and unpredictable, while fertilizer, herbicides and fuel – crucial to agriculture – have skyrocketed. According to the United Nations, an area of fertile soil the size of Ukraine is lost every year because of drought, deforestation and climate instability. The world is headed for a perfect storm. The only solution is to take action, says Friedland.

“Almost every household in Canada has the Internet,” says Friedland. “Use it to inform yourself. Do a little research and see how you can cut down. Does a family of four need five cellphones? No. There are all kinds of ways to save. All you have to do is put in a bit of effort.”

It’s not only consumers who will feel the pinch, but farmers too. In the short term, high food prices are a good thing for farmers. But even higher costs are eating into their profits, and as China and India continue to develop, billions of people will need more energy and food, doubling global demand by 2030, according to the World Bank. But even if food prices double in this province, we should still count our blessings, says Ernie Zelinski, the Alberta author of The Joy of Not Working and How to Retire Happy, Wild and Free. Since walking away from full-time employment in the mid-1980s, Zelinski has gotten used to living on a tight budget and leaving a small carbon footprint.

“We’ve had it so good for so many years, we feel entitled to it,” says Zelinski. “I think farmers should feel entitled to make three times what they do because they work so hard. We should feel fortunate that we have had the food prices we have had for so long.”

Zelinski drives a small car short distances, keeps the heat down in his small home and walks to his favourite haunts. He clips coupons, buys in bulk, shops locally in season and compares prices. He advises Albertans with tips to live small: dump your SUVs and big homes, turn off the AC when you leave the house.

“The idea is to live within your means and not create too much waste,” he says. “We can all cut down if we want to. There are two ways to handle money: One is to spend less than you earn, and the other is to earn more than you spend.”

Because most agricultural commodities, such as grain, fuel and fertilizer, are priced in U.S. dollars, the strong loonie has cushioned Canadian consumers from price increases. We have also benefited from stiff competition among grocery chains. According to Statistics Canada, food prices in general are only up 1.9 per cent since 2007. Price changes in commodity categories are – so far – all over the map. Cereal prices are going up, meat products remain unchanged and orange prices have gone down. Livestock market analyst with Alberta Agriculture and Rural Development, Clinton Dobson, says everyone has to re-evaluate. “Higher shipping costs are forcing manufacturers to evaluate packaging and product design to reduce their freight bill. Higher fuel and energy costs also signal a need to ensure that manufacturing facilities are energy efficient,” he says.

Efficiency is the clarion call everywhere, especially in the beef industry. Hard hit by the loss of revenue from BSE, and with the price of feed more than double what it was five years ago, producers’ organizations are recommending energy efficiency and innovation. But with 80 per cent of their product going to locations outside of Alberta, the chair of the Alberta Beef Producers, Erik Butters, says there aren’t going to be any immediate solutions just yet. Like Zelinski, Butters says Canadians have been lucky.

“Our costs now are getting up to what Europeans have been paying for years,” says Butters. “But it’s not easy to adapt to a major cost doubling. We have been spoiled and now we’re feeling the impact.”

Grains and oilseeds produced around the world are now also used for non-food items in place of petroleum-based products. Flax is manufactured into linoleum and paints; some forms of canola are used to produce oil for industrial purposes. Higher prices for these may encourage farmers to increase production, which could have an impact down the road. But the likelihood is the cost of basic groceries is going to increase anyway. If we get creative, don’t get hung up on material goods and gadgets, and work together, we will weather the storm better, says Stony Plain Co-op store general manager Ed Berney. Berney is seeing a lot more shoppers with calculators in hand.

“People are not grumbling but they seem thoroughly aware they have to watch their money,” he says.

Consumers can help each other by combining buying power, carpooling with neighbours and talking to their kids. Berney has two adolescents in his household. His 16-year-old son is very cost-conscious because he’s expected to chip in on that cool new pair of jeans. His 13-year-old is just starting to enter the workforce and struggles to understand the difference between a want and a need. Working together is part of their response as a family. Berney’s kids contribute to the grocery bill and are expected to be energy conscious. “Each person can control their footprint, says Berney. “Change will be slow, and everyone will have to play their part if they want to make a difference.”

‘‘Live within your means and don’t create too much waste. We can all cut down.’’