Will Food Prices Keep Rising? Weather’s Impact on Grocery Costs

Extreme weather events—fires, floods, heat waves and droughts—are increasingly threatening Canada’s food supply chain, placing upward pressure on prices that reach the grocery store shelf, experts warn.

“When major weather-related events occur, costs generally rise,” said Frank Scali, vice-president of industry affairs at Food, Health & Consumer Products of Canada. These events are becoming more frequent and more intense in Canada and around the world, creating new challenges for food producers, processors and distributors.

A 2019 federal report concluded that rising temperatures driven by human activity are expected to continue, and precipitation patterns will change. Those shifts increase the likelihood of both severe flooding and more frequent droughts, each of which can disrupt production and logistics.

Canada’s weather and food prices

Weather is a primary driver of agricultural outcomes. Too much or too little heat and moisture affects yields, crop quality and, in some cases, the spread of pests and plant disease. “Weather can also impact activities further down the supply chain,” said Amanda Norris, senior economist at Farm Credit Canada. Damaged roads, bridges and rail corridors after floods or landslides can change transportation routes and limit the ability to move food from farms to processing facilities and retailers.

When supply is reduced by weather-related losses and demand remains steady, prices rise. Shortages caused by extreme events can push commodity prices up, which then ripple through to consumers.

Recent industry assessments describe a cascade of challenges for agriculture, with climate extremes repeatedly identified by producers and policy makers as a top risk to the sector. In surveys, respondents cite extreme weather among the most serious threats to production and to the reliability of supply chains.

The costs of floods and fires

Major floods in British Columbia several years ago devastated farms, killing hundreds of thousands of animals and damaging infrastructure. Drought in parts of the Prairies has similarly reduced crop yields in recent seasons, contributing to significant year-to-year swings in output for some commodities.

Producers have adopted practices that improve resilience—such as no-till farming to conserve soil moisture and other conservation measures. Those practices can reduce vulnerability in typical years, but they cannot fully protect crops from extreme heat, prolonged drought, or severe storms.

Extreme weather abroad also affects Canadian producers indirectly. If growing conditions in other major producing regions falter, global commodity prices can spike and input costs—like fertilizer and transportation—can rise, increasing costs for Canadian farmers and food manufacturers.

For manufacturers, processors and retailers farther along the supply chain, the impact of extreme weather is often indirect. Many supply chains are built to minimize cost, which can mean reliance on a small number of large facilities or single suppliers for critical inputs. A disruption at one node can therefore trigger a domino effect of shortages and delays.

The COVID-19 pandemic showed companies that the lowest-cost configuration can be fragile. Since then, many firms have expanded sourcing, mapped supply chains and built contingency plans. Those changes improve resilience, but they cannot eliminate all risks. As extreme weather events increase in frequency and severity, shortages and price volatility are likely to become more common.

Getting food across Canada

Transportation networks are vulnerable to extreme events. Wildfires, floods and other hazards can force rail closures, damage highways and overload truck capacity. Rail outages in Western Canada, for example, have required shippers to rely more on trucks—an option that is costly and limited by the number of available drivers and vehicles.

Short-term disruptions are sometimes absorbed by businesses to avoid immediate price hikes. But sustained or recurring interruptions generally lead to higher prices, as additional costs for rerouting, storage and expedited shipments are passed along the supply chain.

What Canadians can expect with food prices

Consumers may experience the impacts of extreme weather in two clear ways: higher prices for affected items and temporary shortages or substitution of products. Recent examples include spikes in lettuce prices due to production problems in key growing regions, and price volatility in cocoa and orange juice when major producing areas have been hit by extreme heat, disease or extreme weather events.

Seasonal crops such as strawberries are especially sensitive to rising temperatures and changing precipitation patterns; regions that supply Canada by import can experience shorter windows of production and lower yields, which in turn affect availability and cost at retail.

Although many food categories that were volatile during the pandemic have since stabilized, ongoing extreme heat and other climate-related events can still influence prices later in the year. Geopolitical events and trade disruptions add further uncertainty: when global supplies tighten, domestic weather-related losses have a larger effect on prices than they otherwise would.

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