00:01:03.980Now, really, this whole conversation stems from us having a discussion, as we do as a group here,
00:01:10.220about what stories we want to cover. And of course, war and supply chain management seems
00:01:18.620to be the next major concern, the cost of food based on inflation of gas prices, overall fuel
00:01:25.380prices and i thought it would be a good place to check in with you and see what the perspective is
00:01:31.780that you're seeing currently and where you expect us to go when it comes to impact from the uh the
00:01:38.340warren yeah i mean yet we're dealing with another geopolitical shock uh so of course the last one
00:01:47.620was ukraine four years ago and uh so on february 24 2022 uh everything went up like everything
00:01:57.140just got disrupted fertilizer prices uh commodity prices energy of course it all went up at once
00:02:06.580um and very brutally like violently by by july uh we all knew that we were all in trouble and so it
00:02:14.500was just a matter of time before it was going to hit the grocery aisles essentially in canada
00:02:21.940this time around is a little different uh for a couple reasons one uh it is about access to energy
00:02:30.340and fertilizers uh but fertilizers tend not to affect odd commodities right away and we'll see
00:02:36.660later in the year how markets react to forecasts and how yields are going to be impacted by the
00:02:43.300lack of fertilizers across North America, essentially, because farmers, we don't know
00:02:49.760exactly whether farmers will decide not to buy or will decide not to put money into the ground.
00:02:56.540And that's when we'll see. I mean, yields are the most important thing to measure. So we don't know
00:03:00.340yet how food prices, input costs will be impacted. But right now it's all about energy. And so
00:03:08.640So knowing that 25-30% of all nat gas and oil goes through that Strait of Ormuz, I mean, right now, oil is, what, at $92 a barrel.
00:03:21.240The rally started in January. I know the attack started on February 28th.
00:03:26.420But really, when you look at charts, the market was anticipating some sort of attack as of January 7th.
00:03:35.700That's really when you started to see this swing from $55 US a barrel to $116 at some point.
00:03:45.080And so this swing, the swings that you're seeing with oil prices is even worse than seeing this consistent progression with oil prices that we saw with Ukraine.
00:03:58.080Because, I mean, if you're transporting food, you're going to highball the price of energy.
00:04:03.920you're going to highball the price of gas or diesel. And so it doesn't matter if actually oil
00:04:08.320drops, companies will charge more. You're still pricing at that level, even at the wholesale
00:04:14.720end of it. So now it's interesting that you point out that the market began to shift even before
00:04:20.980things began to take shape officially in a war aspect. That leads me to believe that we can
00:04:30.880probably have a little bit of foresight now although we don't know uh you know what's going
00:04:35.560to happen with peace talks we don't understand necessarily what's going to happen in the
00:04:39.240Strait of Hormuz but the one thing that we might be able to do is take that sort of highball note
00:04:44.240and look out maybe three or four months from now if prices began to skyrocket almost overnight
00:04:51.740and they're taking the high-end pricing on things what do you predict the next few months to look
00:04:57.900like for Canadians maybe not just even on groceries but on overall consumer yeah so we just
00:05:04.640got numbers for March so we landed at four percent for general food inflation in store
00:05:13.760was at 4.4 percent I would qualify those numbers as bottoms so so yeah so we are expecting the
00:05:23.640inflation rate to uh to rise in april right now we're we're in april and we're seeing produce
00:05:30.520prices uh increasing and meat prices as well so i mean these products are are energy intensive
00:05:38.360because you need a cold chain and cold chain cold chains are about refrigeration so yes yes you have
00:05:44.600to transport stuff you have but you have to keep it cool and fresh and safe as well and so that's
00:05:51.400i mean the entire food supply chain is incredibly energy intensive so i do i do expect food
00:05:57.320inflation to rise i mean we actually did forecast all of this five months ago i mean we were we
00:06:04.200were forecasting for inflation to be anywhere between four to six percent and we're probably
00:06:08.440going to be landing by the end of the year i would say at around six percent but it is food inflation
00:06:14.600so it's six percent above what we were seeing last year 12 months ago yeah yeah uh so that is a huge
00:06:22.680hike uh you know where would you think we would have been let's say that we don't have an energy
00:06:28.040crisis right now um but we are headed into a new negotiation process over kuzma i've noticed that
00:06:34.680they dropped the sea from kuzma maybe we're not part of that deal anymore but well actually it
00:06:40.920depends who you are if you're an american it's funny because all the weekend i was in kamloops bc
00:06:46.200talking to 300 people half of the room were americans half of the room were canadians so
00:06:52.120on the one half it's the us mca yeah united states and for canadians it's it's cosma it
00:06:59.320starts with canada that's that's the rule i think everybody starts with their own country so
00:07:04.680exactly uh but having said that you know we're leaning up against that if we don't have an
00:07:10.280energy crisis at the moment where do you think we would have landed on inflation in store
00:07:18.520uh well i mean right now i would say i don't think we were seeing much of a difference uh
00:07:26.760well actually i would say that probably food inflation would have been lower than four percent
00:07:32.280slightly lower but certainly what we're going to get for april may june will be would be lower
00:07:38.040for sure right and so uh but i mean the deal is this there's always something i mean this is the
00:07:46.760reality of of of modern food systems there's always going to be something impacting food prices
00:07:53.960if it's not climate change it's going to be geopolitics if it's not geopolitics it's going
00:07:59.160to be the currency if it's not currency it's going to be a labor dispute of some sort i mean
00:08:05.160there's always something and and the difference between today and say 20 years ago 30 years ago
00:08:11.720is that the intensity of all of these factors events are are becoming much larger and scalable
00:08:21.000and that's really the difference between say 2000 2010 versus now and of course the entire world
00:08:28.040is interconnected so if something happens in the straight of our moves if something happens in
00:08:33.000in Ukraine it impacts also all of us even though we don't buy anything from Ukraine but very very
00:08:39.140little it did end up costing us a lot at the grocery store. Now this really does affect Canadians
00:08:47.140at the grocery store level the average Canadian is going to be the one paying the price what do
00:08:53.380you see the government doing if anything to step in and try to offset this do we see subsidies in
00:09:00.980in your mind uh down the road do we start to subsidize certain food industries within canada
00:09:07.140what do you what do you predict will be the response to this yeah i mean so you you did
00:09:13.380you did mention kuzma i mean i when the video came out on sunday i was not surprised and uh and
00:09:21.300frankly i think that's exactly what ottawa wants it wants uh canada to slowly less depend economically
00:09:31.860on on the united states and in the ag food sector 75 of all exports go to the west and most of it
00:09:38.580is tariff exempt so if most of our trades in the u.s uh aren't tariff exempt anymore that's going
00:09:47.460to be a absolute game changer because unlike other sectors i mean you can't move farmland i mean
00:09:53.300farmers will farm and will sell and your number one customer right now is the us and if all of
00:09:58.820a sudden you're not as attractive as you used to because of tariffs or whatever is going to happen
00:10:04.900in the us that becomes a problem but what i'm hearing and i think right now uh beyond iran
00:10:11.780that's probably the one thing that industry is concerned about the most what's going to happen
00:10:16.900to customer and as of sunday like if you read between the lines customer is basically dead
00:10:24.500and that's that's my interpretation of what we're seeing right now with uh with ottawa and its trade
00:10:31.780policy and it is a decision that is being made by ottawa we haven't negotiated with amer with the
00:10:38.980americans in months uh i believe over five months now but that's the conclusion that we're making
00:10:44.820in ottawa what i can tell you right now is that many companies and i actually met some in cam
00:10:50.820loops by the way and and it was funny on the weekend because everyone was there to do business
00:10:57.380and the two words i did not hear at all during the two days i was there is trump and carney
00:11:05.220interesting it was all about business and i mean politics are about noise and so it's just
00:11:10.740Right now, we're seeing the slow privatization of trade policy, essentially, because companies are hiring lobbyists to make sure that they're able to continue to trade with specific consumers or customers in the US and Canada, making sure that there's no, I would say, entanglements at the border as much as possible.
00:11:34.700so there's a lot of negotiations between companies and uh and other companies but also
00:11:41.660at at state level there's also some involvement especially blue states in particular
00:11:48.300yeah it's interesting that there's going to be these fine lines of negotiation that either
00:11:53.100sidestep the cost of that tariff or share it in some way but i think we do discount the
00:12:00.780uh tenacity that the uh that the business world has on finding their way to make money finding
00:12:07.020their way to the market the same way consumers find their way to products at the right price
00:12:12.380uh it's just that when everything elevates dramatically all at the same time
00:12:17.980there's this uh settling period i think and hopefully that we come back to a more reasonable
00:12:24.460pricing it's almost like we never unring that bell uh you know for whatever the reason like
00:12:30.860you point out there's always a reason but we never come back we never solve it financially to the
00:12:35.900point where we get back to a pre-problem or pre-crisis pricing uh and so i i can see here
00:12:43.660in canada right now uh that consumers probably will just have to adjust and in that negotiation
00:12:51.420process hope that we're getting the deal that we need otherwise we're going to have to rely
00:12:56.780on corporations to deal with each other to get the items that we want and to get the trade
00:13:01.100moving the way that it needs to that's right i i agree with that for sure and that's why when
00:13:06.460people say well supply management is under threat with trump is i don't think it is under threat
00:13:12.460because there's probably not going to be a deal at all and so that's easy it's easy to resolve
00:13:17.260but we're still stuck with a very archaic policy domestically in canada which is called supply
00:13:23.500management and so i i'm hoping that at some point we won't necessarily missed uh an opportunity to
00:13:30.300make supply managers stronger and more competitive and i'm just afraid that we're just going to say
00:13:35.580oh we're good we're not we don't have to bother we can actually keep it as is and that's the last
00:13:41.580thing you want to do it but it's a very canadian thing to do uh because people don't want conflict
00:13:46.540They don't want to have tough conversations, but I would say that Kuzma is critical, and I would say that for the agri-food sector, it's even more critical than many sectors because margins are so tight.
00:14:00.220An extra 10% of the border, say 5%, 10%, makes a big difference for a jam manufacturer or someone who actually produces pies or whatever you're exporting to the U.S.
00:14:19.060And so what is likely to happen is that if there are tariffs at the border, you could see many companies eat up the tariff to retain customers in the U.S. in hopes of developing more or getting more customers and developing the market further in the U.S.0.86
00:14:38.560Damn, so then that's a really tough business model.
00:14:41.560It seems to be what we do as well.0.99
00:14:43.240you're right uh okay look we'll suffer the price because we hope the bell will unring
00:14:47.720or we'll find a larger market or whatever and keep in mind it's very important for canadians
00:14:51.960because that impacts canadians here people will say well we'll have more food for ourselves well
00:14:56.040yeah perhaps but that food is going to be more expensive you see trades subsidize our own food
00:15:03.640right here at home because it makes our companies more efficient and we actually benefit from those
00:15:09.800efficiencies as consumers here uh any advice you have for consumers as we enter what looks like
00:15:16.280one of the most costly times certainly the most costly time in canadian history defeat ourselves
00:15:20.760and clothe ourselves uh any any uh light on the horizon i know that that's a tough thing to
00:15:27.720actually offer but i think that uh we do owe canadians a little bit of an understanding of
00:15:32.920wow here's what you're going to see in the next year uh brace yourself or or uh look for these
00:15:39.240glimmers of hope i'd say i mean right now i would say that uh we're not in 2022 anymore
00:15:47.400uh in four years i mean in 2022 really it was the first time in many many
00:15:54.040decades uh well in a few decades i guess 12 20 years uh that we saw food inflation rise above
00:16:02.12010 it was painful for a lot of people and most most of us weren't ready uh four years later
00:16:08.520i would say that consumers aren't as ticker shocked because they do their homework before
00:16:13.160leaving the leaving the home the market base the consumer market is much uh better tooled
00:16:22.920today than four years ago and that really puts a lot of pressure on food prices over time people
00:16:29.320don't realize it but they actually have an impact on food prices if you actually know
00:16:34.040that a product is overpriced and you walk away that's a powerful move that's actually a vote
00:16:41.640and saying that is unreasonable that is unacceptable and if people do that more it
00:16:48.520impacts food prices over time so i i think that the consumer market will actually play a much
00:16:54.680larger role this time around to keep prices at bay like unlike in 2022 when people were sticker
00:17:00.200shock and still bought that very expensive piece of beef or that very expensive carrot
00:17:05.960i i noticed that i'm shopping at more localized and many different places rather than the same
00:17:12.280top three grocers uh that we're used to going to here in canada uh any indication that those
00:17:18.200grocers are making any changes that would be beneficial to uh the consumer uh well grocers
00:17:25.480are are focusing more on on private labels i mean there are way more private labels now than before
00:17:32.280because the market is much more frugal than it used to be so that's certainly a change there
00:17:37.320and obviously there are more food rescuing apps being used so you can actually buy easily from
00:17:43.880your phone uh food that is that are discounted 50 60 70 off through uh apps like food hero
00:17:53.400flash food that that's that's helping so the food rescuing business which used to be very
00:18:01.080public and socialized for food banks is slowly becoming privatized and and that's really
00:18:09.480changing and of course beyond the apps you're also seeing more independent stores as you noticed
00:18:17.000that are actually offering some pretty good deals because they actually work they actually work with
00:18:24.840with the supply chain very differently than uh than the regular grocers so so there's there is
00:18:31.800some competition out there uh it's just you can't really see it as as much as the larger players
00:18:38.680so then i really appreciate this now i want people to check out your podcast it's really
00:18:42.600good what is the name of it it's called the food professor yeah the food professor podcast
00:18:49.080it's fantastic it's where i got my introduction uh to some of the discussions that you have
00:18:54.120uh and people can download that i think everywhere you get your podcasts and you guys are enjoying
00:18:59.400some success with this show let's talk about that yeah absolutely i mean seven years ago
00:19:04.280michael oblong my producer called me do you want to do a podcast and i say well first of all i
00:19:09.400don't listen to podcasts and i don't have time and then covet hit and then he called me and say well
00:19:14.040do you have time now i do in fact have time now so in may our first episode was on may 5th 2020
00:19:24.360and we never looked back and you know at first it was one show a month uh and uh because i just
00:19:32.040wanted to test things out and then it became one show every two weeks and uh and people were asking
00:19:39.000for stuff every week so it's a weekly show now and we're so we basically if you look at apple charts
00:19:46.440uh right now we're number five in canada under management but we're the number one canadian
00:19:52.840podcast that's fantastic the food uh the food professor is the name of the podcast and um you
00:20:00.280know we had a chance today to speak to the guy who's really got an eye on what's going on with
00:20:04.120our uh food chain here in canada uh and it's a big deal so uh so then thank you so much for joining us