Higher food prices here to stay, UNB economist says

If you were hoping the easing of inflation would cause a drop in high grocery prices, a University of New Brunswick economist has some bad news.

Herb Emery said New Brunswickers should expect the current prices to become the new normal.

Much of this is due to the "ratchet effect," he said, an economics theory that says it's difficult to move prices back for certain goods once they've risen.

"Food prices are [embedded] in a lot of things like cost of getting things to markets … fertilizer that has to go on the fields and also labour costs," said Emery.

"It's a little harder to bring food prices down."

Emery said consumers have become used to relatively stable grocery prices going back decades and have been taken aback by sharp increases that have come about more recently.

He said one reason behind the increase could be Atlantic Canada's relatively remote location.

"The Atlantic region is becoming much more of a peripheral region in Canada, and we're at the end of supply chains, and it's making it much more expensive to get things to us," Emery said.

Emery said supply and demand also play a role in the cost of goods, but it's not always in the consumer's favour to have too much of a product around.

He cited an example in Alberta where a mad cow disease scare led to a drop in Alberta beef exports.

Consumers expected prices for beef to go down, but they actually went up.

"What we learned was we'd been consuming beef from New Zealand," said Emery.

"When the Alberta beef displaced it, we had a, they told us, a well-priced premium product which had displaced the lower-cost New Zealand beef."

Emery said New Brunswickers will eventually get used to the new prices, especially when wages start increasing.

He said the big issue is volatility, not necessarily higher prices.

"You're paying $10 for, say, a hamburger in Fredericton or Moncton, you're paying $20 for [one in] Boston, and people in Boston don't seem to worry about the price of food," Emery said.

"When you look at it, everyone gets used to it, if it's a stable price."