Canada is uniquely positioned to weather the storm of sharply-rising prices for grains and rice, and is even poised to profit from the current surge, according to a study released June 12, 2008 in the Canadian Economic Observer.

Overall, consumer prices for food consumed at home in Canada have risen only 1.2% in the 12 months ending in April 2008. Food prices increased 7.1% in the European Union and 5.9% in the United States during the same period. Countries in Asia with rice-based diets are experiencing the fastest increase in food costs, as the price of rice doubled early in 2008.

While consumers in Canada face higher prices for bread and cereal products, they have been insulated at the checkout counter from higher overall grocery bills by stable or falling prices for most other products, the study found.

The absence of price increases for these other food products reflects factors such as the lower cost of food imports in the wake of the rising Canadian dollar, and the relatively small role that commodities play in what consumers buy.

For most food products, services contribute the bulk of the value-added for food that consumers buy. As well, sharp relative price shifts give consumers ample room to adapt by substituting lower-priced foods.

From a broader perspective, Canada overall stands to gain from the agricultural price shock, the study found. Canada ran a surplus of $9.0 billion in its trade in agricultural and fish products in 2007.

In the first quarter of 2008, the surplus was on track to break that all-time high, running at an annual rate of $11.2 billion as wheat prices rose.

Moreover, farmers have stepped up their planting this year, especially of higher-priced crops. Besides directly increasing the value of agricultural output and the trade surplus, the boom down on the farm will indirectly benefit a wide range of suppliers, from machinery to transportation, financial and business services.     Read the entire article (pdf)