WE MAY PAY FOR TRUMP AT THE GROCERY STORE.

COMMODITY BOOM TO DRAG FOOD PRICES HIGHER, REPORT PREDICTS

TORONTO • A Donald Trump presidency could spell higher grocery bills for Canadians, according to a new report.

Food prices are forecast to rise between three and five per cent in 2017, says an economic analysis from Dalhousie University, above 2016’s price gains and above the generally acceptable food inflation rate of one per cent to two per cent a year. The surge will see an average Canadian family spend about $420 more on their groceries next year than in 2016, said agriculture expert Sylvain Charlebois, dean of management at Dalhousie and the report’s lead author.

“In our view, Trump could trigger the next commodity supercyle,” Charlebois said, referring to a series of measures that serve to boost the overall prices of commodities, part of a cycle that typically surfaces every 10 to 15 years.

An increase in commodity prices could increase costs for food producers.

Add in a potential interest rate hike and a stronger U.S. dollar, the Dalhousie report says, and Canadians stand to pay even more at the till in 2017.

The last commodity supercycle occurred during the Bush administration a decade ago, and Donald Trump’s promise to fund infrastructure projects has already helped to push up prices for iron, copper and materials such as cement.

“In a supercycle you see a general uplifting of commodity prices, including agriculture. When commodity prices go up, food prices go up and consumers end up paying more for staples, like we saw with higher bread prices when oil was US$143 a barrel (in the summer of 2008).”

Food prices were up 2.5 per cent year over year between January and October 2016 — or about $200 more for the average family compared with the same period in 2015, Charlebois said.

In the meantime the iron ore spot price surged 24 per cent in the month of November to US$73, up from US$59 in October and the commodity’s highest level in two years.

“We expect the next year’s American economy to be more robust because of all of the investment Trump plans to do, and you are probably going to see a stronger American dollar and a weaker Canadian dollar,” Charlebois said.

On Monday, financial services firm Citi initiated a double upgrade for the metals and mining sector stance to bullish. “The key reasons driving our changes is a more robust outlook for 2017 for the commodity complex, especially the bulks, which is leading to cash flow and earnings upgrades along with higher forecasted dividend yields,” the report said.

Dalhousie expects the prices of dairy, eggs, baked goods and cereals will remain within the stable band of price increases next year, zero to two per cent.

But vegetables, fruits and nuts are likely to experience a price jump in Canada because a large percentage of them are imported — rising as much as six per cent for vegetables and five per cent for fruits and nuts in 2017, the report said.

“Changes in the dollar are the main drivers for (vegetables, fruit and nut prices),” Charlebois said. The U.S. Federal Reserve could increase its main rate this month, and it would likely put pressure on the Canadian dollar.

Beyond the economic indicators, there are broader unanswered questions about how a Trump administration will affect the U.S. agricultural industry’s labour practices, the Dalhousie report noted.

About 66,000 migrants enter the U.S. each year on temporary visas to work on farms, but there are an estimated two million illegal workers in the U.S. agricultural sector.

“If Trump decides to actually act on his promise (and deport illegal immigrants), the agriculture sector in the U.S. would be in deep trouble,” Charlebois said.

“Canada imports US$30 billion to US$40 billion worth of food products out of the U.S. and if they have less input, then somebody is going to have to pay for it.”