At one point, it looked like there could be good news for grocery bills. This year. We are expecting to see some easing of food price inflation. That was Bank of Canada Governor Tiff Macklem back in December, and for a moment it looked like he might be right. As of February, we seem to be at least be headed in the right direction. Food inflation was slowing, prices were still high but seemed to be stabilizing. But that same month, more chaos. The US and Israel attacked Iran. Iran closed the Strait of Hormuz, fuel costs shot up, and suddenly the price of almost everything was at risk of going up. So why does a conflict halfway around the world affect what you pay for? Milk, bread and eggs? And what will this all mean for your grocery bill? Welcome to The Rundown. Turns out the health of the global economy has a lot to do with a roughly 170 kilometre waterway between the Persian Gulf and the Gulf of Oman. TVO. Today, producer Lucas Meuse explains why shutting down the Strait of Hormuz sends shockwaves around the world.

The US Israeli strike on Iran has made it clear that whether we are at ceasefire or at war, the global supply chain is incredibly fragile and that the Strait of Hormuz is a very important choke point in the world's economy. Where is the Strait of Hormuz and what makes it so unique? It's located in Western Asia, connecting the Persian Gulf and the Gulf of Oman. The strait is fairly small. It's about 39 km wide at its narrowest spot, and it's bordered by three countries the United Arab Emirates, Oman and Iran. The region is full of mountainous terrain in both Iran and Oman, making it nearly impossible to transport supplies by land. So the strait is the cheapest and easiest way to get resources out of the Persian Gulf and to the rest of the world. And one of the main things coming out of the Gulf is oil. Normally, a lot of international shipping moves through the strait. Daily oil from Saudi Arabia, the UAE, Iraq, Qatar and Iran travel through the strait and make up 80% of the oil that goes to other parts of Asia and 20% of global oil overall. But when Iran cut off almost all the shipping moving through the Strait of Hormuz because of the American and Israeli attack, everything ground to a halt. And since then, global oil prices shot up from $65 a barrel to over $100 a barrel in just over a week. You might have seen increases in gas, something like 20 to $0.30 per litre globally. Well, that increasing gas price means anything that travels also goes up in price. In North America, everything travels by land to get to its final destination. But it's not just oil that travels through the strait. Liquid natural gas also travels through to other parts of Asia. Supplies of aluminum come from the region, sulfur from metal, refining helium for use in making computer chips and cooling MRI machines, and about half of the world's supply of urea travels through the straits. This is crucial because urea is used for fertilizer for so many crops, so having it sit in the Gulf is a huge problem for farmers heading into planting season. These items aluminum, fertilizer, oil are all considered essential to an economy. They're basically our economic building blocks. This choke point in shipping creates gaps in the supply chain and when supply goes down but demand stays high, prices rise in response. And because of the interconnected nature of the world's economy, this has a ripple effect in so many other regions. Every industry will see price hikes. As a result, any extended break in the supply chain can lead to a global recession. And even if the break in the supply chain is fixed, say like the war between Iran, the US and Israel ends, prices and shortages could take months to recover as the disruption of the blockade continues to ripple through the supply chain. Ultimately, the Strait of Hormuz is only one small but essential cog in the delicate machinery of the global economy.

According to data from Statistics Canada, growth in grocery prices did slow in February, but they've risen more than 30% since February 2021. With all the political and economic turbulence, what's the outlook now? Carolyn Stewart is the CEO of Feed Ontario. And joining us from Vancouver, Gary Sands is the senior vice president of policy and advocacy for the Canadian Federation of Independent Grocers. And in Guelph. Mike von Massow is a food economist and professor at the University of Guelph. Great to have you in studio, Carolyn. Great to have you both on the line. Now, Gary, I want to talk to you. Even before the US Israeli attacks on Iran on February 28th, grocery prices here in Canada have been going up. What are some of the reasons for those food prices to be hitting these numbers? I think we're at 30% higher in the last five years. I think it's almost I'm at the point where it's not what is affecting the price of groceries. It's what is not. I mean, the list keeps growing. We've had the war in Ukraine. Of course, we've had numerous climate issues, catastrophes, depending on where you're situated, everything from wildfires, drought. We've had port and rail disruptions, and now we've got the the issue in in the Mideast, it's almost like the four horsemen of the apocalypse have taken up careers in the food industry. That's that's how we feel and how we felt for the last for years. I just think it's important. I know we'll get into this during the course of the discussion today, but I think it's important for the viewers to know that I'm speaking from the perspective of the independent grocers. There's just very, very little that we can do to insulate ourselves from the things that are taking place in the industry and in the world. It's just these rising prices are global in nature. And you're right, we they are higher in Canada. But I would point out the fact that we do have some special challenges here in Canada that aren't experienced, even, say, south of the border. We have a challenging climate. We have a challenging geography. The cost of transporting goods, for example, is is significantly higher to many parts of the country as opposed to whether we're in Vancouver, Toronto, Ottawa. And I think sometimes we forget about that. Mike, Gary mentions Ukraine. So let's talk about it. Why did the Ukraine war impact global food prices more than, say, the Iran conflict right now? Well, I think the big difference between Iran and Ukraine is that Ukraine is a significant exporter of food products. So we didn't just see oil prices go up when when the war in Ukraine started, we saw that wheat and that sunflower oil come off the market. And again, basic supply and demand, when when there's less available, those prices go up. So we saw significant increases in wheat based products. We saw significant increases in vegetable oil products made worse by a drought in, in and bad weather in Europe that affected the the olive oil yield. We saw countries like Malaysia limit exports of palm oil in order to keep prices domestic prices low. So we had almost this perfect storm, as Gary was saying, of, of factors that affected food prices along with increased increased fuel prices. Iran has been different because they are not a significant exporter. The Strait of Hormuz doesn't have a lot of food coming out of it. There's some food going into Iran. And so the impact of the war in Ukraine was much more significant than the than the war in Iran has been. Carolyn, from your perspective at Feed Ontario, how does grocery affordability and demand for food banks in the province look like right now? Yeah, I mean, unfortunately, we're already seeing record highs at food banks. You know, last year we saw over a million people access over 8.7 million times. And that was before we'd seen these additional economic pressure points that are that are really hitting, hitting individuals and so on. Fortunately, there's so many people that are already on the cusp, right? We're serving the people that are in the most dire circumstances that need support. But then there are so many people that are just getting by, right? And as fuel costs increase, as housing costs increase, as a job market, certain wages stay stagnant. And then now we're adding on top of that, another increase. They burnt through those savings through Covid. They've really done all their best that they could over time. And what our biggest concern is right now is that those people that are just getting by are going to be falling into deeper levels of poverty, and then we're going to be seeing them at the food banks as well. It's taking people longer and longer to get kind of transition off of this level of support. It used to be about six months. If we're talking ten years ago now, it's 18 months to two and a half years. And so just the chronic demand and the need for support is growing. And that's a reflection of the cost of living we're seeing today. Help us understand sort of that long term. I feel like that number of people accessing food banks has only gone higher and higher and higher. I feel like any press release I see it is that number has hit a record number. Is this time different than any other? I mean, different in the way that it continues to be unprecedented and unpredictable, as Gary was talking about. Right. A lot of these things are so far out of the control of so many folks that they can they're already they've already tried all those different solutions. Can I downsize? Can I buy cheaper groceries? Can I move to a smaller place for renting? Can I skip utilities this month? Can I burn through my savings? Can I put it on credit? Right. Like these are all the strategies people are taking before they're even getting to using a food bank. So when we get to them, there's a lot of circumstances in where we're having to provide support for folks, but they're in very, very dire circumstances. And so the reality is, is that we know the numbers are going to increase with what we're seeing right now. You know, everyone is feeling the pinch right now. I think no matter what your income, you can see the price is changing. And so now imagine if you didn't have any money left to begin with at the end of the month. So it's, it's, it's a difficult time for Ontarians for sure. All right, let's switch gears from food banks over to the fields. Right now. It's planting season here in Canada and in North America. Gary, what are producers talking about right now in terms of how they are managing the rising costs that go into planting? Well, I'll go back to what Mike was saying earlier. And actually one of the other impacts besides fuel that we'll see an impact from the the closure of the Straits is fertilizer. There's a lot of global supply of fertilizer that comes through those straits. And that's going to impact supply worldwide. A lot of Western Canada gets their fertilizer out here, but there it will it will have a an effect throughout the country. So that's going to have an impact on on the producers. The supply chain in Canada is very interconnected and interdependent. You know, if at the producer level of the catch a cold at the retail level, we're going to sneeze. That's, you know, so whatever they're feeling, we're we're feeling and things are very, very tight right now. The only thing I would add, though, is when we talk about what's going on is we need to have more, I think, constructive discussions around what the solutions are, because some of the solutions that we've been talking about, I think are wrong-headed. And I'll give you a recent example. The government of Manitoba froze the price of milk for two litre, a one litre container. Sorry. And their intentions were were well meaning, but they exempted the producers and the processors from that price freeze. They just froze out of retail. So just to give you a little shine, a little light on how the industry works and the chains will simply tell the processors, that's the companies that are, you know, processed the milk and are now shipping it to the retailers. We're not accepting that increase because we're we've had our price frozen. So good luck with that. For an independent grocer, we have to eat that. So throughout the entire supply chain, the producers are exempt. The processors will have their price increase turned back by the chains. And it'll just be the independent grocer in Manitoba that will be impacted by that. And we've I've also seen things around discussions around government grocery stores, maybe in that a little bit. But, you know, I just think it it's not exciting perhaps to talk about some of the solutions that I think are, are issues that we need to be talking about. But there are no simple solutions. There are no there's no magic bullet, whether you're talking about producers or all the way up to retail. I promise we will get to some solutions. But I do want to get Mike in this in terms of what, you know, producers are saying, in terms of if how they're managing these rising input costs, are they considering changing crops altogether? And on top of that, it's not just those inputs. We're also talking about food packaging here as well. Mike, shed some light in terms of, you know, the costs outside of of those things. Well, I think what we're going to see is producers bear a disproportionate burden of these price increases. And we're lucky in North America that much of the fertilizer for this year was pre-purchased. It's purchased in the fall, so some people will feel the price increases, but it probably won't be as significant as if the war had happened six months ago. And we saw we saw the fertilizer prices automatically applied, but we're going to see increases in in packaging costs because a lot of those plastic packaging come from petroleum based products. We're going to see farmers having to pay more for fuel and and we are seeing some adjustments. The USDA is saying corn, which is a fertilizer intensive crop intentions are down about 3% and soybean are up about 4%. That doesn't sound like a lot, but that can drive prices up. And and we know that there are there are fertilizer hikes across the world. So we will see as we get to the harvest, what happens with yields across across the world farmers are price takers, particularly in Canada. So automatic we don't automatically see price increases on their outputs. And therefore in the grocery store because their costs have gone up. So I think we will see some impacts. But it probably the will be disproportionately borne by the farmers rather than rather than the rest of us as consumers. Carolyn, what are some of the most significant changes we're seeing from people at grocery stores and food patterns? What are people avoiding? What are people turning to? Yeah, I think it's important to remember that when people are on a budget, they're automatically going to try and look for the most cost effective things. So that's, that's something when you're dealing with food insecurity and you're on the food security insecurity continuum, that's where you're going to focus. So they're going to focus on the more inexpensive or the less expensive, the less nutritious, less fresh product because they're dollar stretches the furthest. And so when it comes to proteins, which are very expensive, so fresh meat, fish, poultry of any kind produce, depending on where it's coming from. Those are all the things, particularly when you're talking about more isolated or rural communities like northern Ontario, you're going to see those costs escalate even more, and therefore, the division of people who have and have not very extreme when it comes to food and even at food banks themselves, which is funny. People often forget, you know, they're providing the food, but they're dealing with very much the things that that Mike is talking about. So increased costs of even pulp to make cardboard is impacting us. You know, the cost of packaging for prepared food, all of those things affect their ability to operate to then in turn serve folks who need them. Gary, how much do you worry that more smaller groceries or farmers will close up business just because things, as you mentioned, these margins are very small that we're dealing with here, but things aren't as sustainable? I worry a lot about it. And I think we as Canadians, Ontarians, we should be worried about it. You know, I don't want to sound like an infomercial here, but, you know, we have about 6900 independent grocers in Canada, about 59% of the of the grocery stores actually in Ontario are independent. That doesn't translate into, you know, leverage in terms of buying power. But a lot of those independents are in very rural, remote communities. There's a couple areas of the country where they're largely serving indigenous communities. And when you're on an overall margin of 2%, and we're talking about some of the issues that we've been talking about already that are having impact on price, I think it's becoming more of a less of an issue of food affordability and more one of food security for those communities. If those independent grocers close down, a lot of those communities that I'm talking about, that's it. There's there's nobody moving back in. And that's that's a real concern to me. And I think it should be as Canadians. Mike, public grocery stores are having a moment right now. Toronto City Council has introduced a pilot program for a government run grocery store. Is this actually an answer to food affordability? I think definitively no. Publicly owned grocery stores are not an answer. And I think Gary highlighted a couple of things. Grocery stores are are are the tip of the iceberg. There's that distribution infrastructure that's underneath there. And, and the, and the purchase relationships that are critical. And, and so it would end up costing the government more money than they could discount food to, to, to make it affordable. I think, you know, to talk about solutions, things like nutrition North, where we're subsidizing healthy food products in the, in the northern communities or this GST tax credit, where, where we're putting money directly in the pockets of Canadians that need it the most, I think is, is a much better approach. If you look the example that many of the people on public grocery stores are using is the US Army commissary model and saying, oh, we'll just subsidize the the overhead costs and we can lower, lower the prices, but they lower prices by about 23%. But subsidies represent 25 to 30% of the of, of their actual revenue. So we're actually spending more money discounting groceries than we are giving them cheaper groceries. I think we're much better in much better place if we target those, those dollars to people that are coming to, to see Carolyn and her members. And they'll spend money at at Gary and their members because that's that will be the best bang for the buck. And that infrastructure on that policy is already there. So, so I think this, this publicly owned grocery store idea, while while it sounds good and oh, we're going to stick it to the big corporations is going to cost us more than we're going to benefit Canadians. And I think there are much better ways to do that. Gary, I'll get you in on there as well. Yeah, I, I echo. Everything Mike said and I, I, like I said, I, I think what I found most troubling over the last 4 or 5 years in particular, I think it started during Covid and I, I understand the concerns around affordability and, and some of the numbers around food that food banks. And I see it in my own community where I see the long line-ups for people. And that that's heartbreaking, but I, I'm getting a sense my sense is that we're, we're, we're looking for simple solutions and we're spending a lot of time pointing fingers at different people. We're looking for a scapegoat. And I think that's unfortunate. You know, the, the government grocery store idea is held up as a, a simple solution. And I, I would say with all respect, the people advocating that it's just a, it's simply a case of they don't know what they don't know. And I think Mike's alluded to all, all of the, the reasons for that. And even with the chains in terms of cost increases, I see from my members what the same increases that the chains are getting. We. I see the invoices and they're all going up. And I think it's, you know, it's very easy to point the fingers even at the chains. And please, please understand, I don't represent the chains, but I think it's unfortunate to just say, well, there's, there's price gouging and I, I would add that that actually has been investigated by the Competition Bureau. It's studying the retail grocery industry in 2023. It's been looked at by Sylvain Agri-food Institute. It's been looked at by the House of Commons, all party agriculture and Agri-Food Committee all have come out with the same conclusions. There is no evidence of price gouging. I don't know, I'm not privy to the the the the statements or or the you know, what the chains are making in other areas. But as a percentage of their sales, their their numbers aren't, are out of the ballpark. And I, I, you know, when I say about the suppliers increasing costs, I think it's important that we in turn, are not pointing our fingers at the suppliers. When we start pointing fingers at each other, we're not having constructive conversations. And that's what I think has been missing in this country. Well, let's let's switch gears here. Let's go to those solutions. I'm going to point the fingers. I'm going to point at you, Caitlin. First, the federal and provincial government have been more assertive in sectors like mining, energy and defence, as we've seen with what's happening in the US. How could Canada take a similar approach when it comes to the agri food sector to strengthen self-sufficiency and help with food affordability. Having sufficient income? So there's a lot of federal and provincial policies that can be put into play outside of what's been done already, right? We've seen some great investments economically in terms of sectors. So whether that's building mining, as you said, or or a few other pieces. But for those who are already struggling with food insecurity, those are not the investments that are immediately going to make the difference. There's a lot of social policy levers that can be pulled right now to truly make a difference when it comes to food insecurity and helping us weather the diversity, you know, even modernization of employment insurance. Right now, only 1 in 4 Ontarians actually accesses what they can pay into, because it really reflects a time when you work the same job for 30 years instead of right now, where a lot of us work in the gig economy and aren't actually covered by the Employment Standards Act, whether it's working to incentivize work on the Ontario Works program at the provincial level there, there are work thresholds for them. They can only work for 200, gain $200 in income before they start to be clawed back. Let's think about innovative ideas that reflect really great employment and really great labour to allow for for other sectors to thrive as well. Mike, when we're thinking about solutions here, I'm, I'm looking at the Ontario food terminal. Is there something that can be done here in terms of replicating that across the province? We talk about Gary talking about the geography as well, but is that something that we should be looking at in terms of solutions as well? Well, I think the food terminal is an excellent example of food distribution that works, but I highlight that that the, the grocers that aren't using the food terminal aren't using it because they're buying more, more volume and more effectively. And, and so I think that that, you know, as Gary said there, his members are, are working on smaller margins because they don't have the buying power that the, that the big guys do. I think the, his members are also going to suffer disproportionately from higher freight prices because they're getting smaller loads and they're going longer distances. So some of those independent those rural communities are are going to feel this more substantially. I think that to get to your previous question to Carolyn, we are self-sufficient in food. We export huge amounts of canola, we export soybeans, we export wheat. We, we we export beef, we export pork. Our imports are about getting fresh fruits and vegetables in the winter. It's about getting bananas, which we don't grow on the banks of the Grand River here in Ontario. And, and, and, so it's choice. And I think that we undervalue our food system. We have great producers here. We have great producers globally. And to me to to Carolyn's point earlier, food security in this country is an income issue. It is not a food availability issue that, you know, Gary made the point earlier about about rural communities. And I think that's real. But but I think the real cruelty we have in this in this province is that there's lots of food on the shelf at the grocery store. It's just that people don't have the money to buy it. And we need to think about rather than saying, we need to fundamentally change how we produce food or, or, or the economics of food production in this country. And we need to think about, as Carolyn said, employment insurance, minimum wage. And and remember that food security is not just about the price of food, it is the price of fuel. So food insecurity is going down now because fewer transportation prices are going up. And so food prices will go up a little bit, but your commute will go up and and people working multiple jobs, I think, I think that those are the things we really need to be thinking about. If we're going to be serious about addressing the problem of food security in this country. Gary, I'm going to give you the last 30 seconds here. When we talk about solutions, picking up upon what Carolyn and Mike had to say there. I, I, I would support. Everything that's been said. I do think I know the Ontario food terminal. It's, it's really a jewel. I think we should be looking as a country at. Can we replicate that in other regions of the country? Can we look at regional distribution centres? I also think we should be looking at. I hate to use this word, but subsidizing the cost of transportation, if you're. And this isn't a subsidy for the independent grocers. I'm talking about subsidizing the trucking companies that are. If you're sending something to 300 km. In terms of the transportation, particularly in the winter, we should be looking at somehow offsetting those costs, which would help address affordability. All right. We are going to have to leave it there. Mike. Gary, Carolyn, I really appreciate it. Some great points. Thank you so much. Thank you. Thank you for having me. I'm Jayyan. Thanks for watching The Rundown. What topics would you like to see us tackle? Send us your suggestions at rundown at TVO.org or leave us a comment on YouTube. Until then, I will see you tomorrow.♪

Mike, when we're thinking about solutions here, I'm, I'm looking at the Ontario food terminal. Is there something that can be done here in terms of replicating that across the province? We talk about Gary talking about the geography as well, but is that something that we should be looking at in terms of solutions as well? Well, I think the food terminal is an excellent example of food distribution that works, but I highlight that that the, the grocers that aren't using the food terminal aren't using it because they're buying more, more volume and more effectively. And, and so I think that that, you know, as Gary said there, his members are, are working on smaller margins because they don't have the buying power that the, that the big guys do. I think the, his members are also going to suffer disproportionately from higher freight prices because they're getting smaller loads and they're going longer distances. So some of those independent those rural communities are are going to feel this more substantially. I think that to get to your previous question to Carolyn, we are self-sufficient in food. We export huge amounts of canola, we export soybeans, we export wheat. We, we we export beef, we export pork. Our imports are about getting fresh fruits and vegetables in the winter. It's about getting bananas, which we don't grow on the banks of the Grand River here in Ontario. And, and, and, so it's choice. And I think that we undervalue our food system. We have great producers here. We have great producers globally. And to me to to Carolyn's point earlier, food security in this country is an income issue. It is not a food availability issue that, you know, Gary made the point earlier about about rural communities. And I think that's real. But but I think the real cruelty we have in this in this province is that there's lots of food on the shelf at the grocery store. It's just that people don't have the money to buy it. And we need to think about rather than saying, we need to fundamentally change how we produce food or, or, or the economics of food production in this country. And we need to think about, as Carolyn said, employment insurance, minimum wage. And and remember that food security is not just about the price of food, it is the price of fuel. So food insecurity is going down now because fewer transportation prices are going up. And so food prices will go up a little bit, but your commute will go up and and people working multiple jobs, I think, I think that those are the things we really need to be thinking about. If we're going to be serious about addressing the problem of food security in this country. Gary, I'm going to give you the last 30 seconds here. When we talk about solutions, picking up upon what Carolyn and Mike had to say there. I, I, I would support. Everything that's been said. I do think I know the Ontario food terminal. It's, it's really a jewel. I think we should be looking as a country at. Can we replicate that in other regions of the country? Can we look at regional distribution centres? I also think we should be looking at. I hate to use this word, but subsidizing the cost of transportation, if you're. And this isn't a subsidy for the independent grocers. I'm talking about subsidizing the trucking companies that are. If you're sending something to 300 km. In terms of the transportation, particularly in the winter, we should be looking at somehow offsetting those costs, which would help address affordability. All right. We are going to have to leave it there. Mike. Gary, Carolyn, I really appreciate it. Some great points. Thank you so much. Thank you. Thank you for having me. I'm Jayyan. Thanks for watching The Rundown. What topics would you like to see us tackle? Send us your suggestions at rundown at TVO.org or leave us a comment on YouTube. Until then, I will see you tomorrow.♪