Food prices in Canada are expected to remain elevated next year even as inflation pressures gradually ease, according to a new report examining the outlook for 2026.
BNN Bloomberg spoke with LJ Valencia, economist at Desjardins, about the factors shaping food inflation and why grocery costs may stabilize but remain higher than pre-pandemic norms.
Key Takeaways
- Food inflation in Canada is expected to remain above pre-pandemic levels in the near term.
- Grocery prices are projected to be the main driver of food inflation in 2026.
- Restaurant food prices may continue rising, though at a slower pace than grocery costs.
- Supply chain disruptions, rising input costs and extreme weather have contributed to higher food prices since the pandemic.
- Roughly one in five Canadian households faces moderate or severe food insecurity, highlighting the ongoing impact of high food costs.
Read the full transcript below:
ROGER: A new report from Desjardins is taking a closer look at whether Canadians can expect any meaningful relief from food inflation in 2026. To help us unpack the findings and what they could mean for consumers, we’re joined now by the report’s author, LJ Valencia, an economist with Desjardins. LJ, thanks very much for joining us.
LJ: Pleasure to be with you today.
ROGER: Overall, what are we looking at when it comes to food inflation next year?
LJ: In the near term, we do anticipate food inflation to remain elevated relative to pre-pandemic norms. The main driver we believe for 2026 will be the prices of food purchased from stores. That said, we still expect to see some contribution from the prices of food purchased from restaurants, which will be slower but still sustained. Part of this is motivated by base-year effects stemming from the GST/HST holiday from at least a year ago. That said, we do expect price growth to likely stabilize as factors such as input costs and wage growth gradually normalize.
ROGER: Going back for a second, you said since the pandemic. What has been driving the cost of food higher?
LJ: Since after the end of the pandemic, there has been a myriad of factors putting overlapping pressures on food prices, such as supply chain disruptions and growing input costs. Last but definitely not least, extreme weather events linked to climate change have affected the stability of food supply compared with what we were used to before the pandemic.
ROGER: How significant has that been getting? Do you have any stats on extreme weather incidents?
LJ: There have been studies suggesting extreme weather events have been rendering global agricultural supplies more unstable, as we cited in our report. We don’t necessarily have a full quantitative factor, but we do expect extreme weather events to be an upside risk to price growth. For example, droughts in the summer could cause domestic and international food supplies to decline. We have seen this happen in the past, such as in 2021 when extreme droughts affected domestic agricultural supplies.
ROGER: Looking ahead to 2026, let’s break it down a little more. In the first half, where will pressures come from?
LJ: At the moment it’s roughly balanced, but in the near term we expect food purchased from restaurants to drive much of the price growth. For much of 2026, however, food purchased from stores will make up a larger contribution to food CPI. If we look at this in the context of headline CPI, we expect a contribution of roughly 0.5 percentage points in 2026 and 0.4 percentage points in 2027 for food inflation overall.
ROGER: Is that fuel costs, seed costs or wages driving this?
LJ: There are a number of factors influencing the outlook. Canada is a small, open economy, so we don’t have much influence over the prices of goods we import. That leaves us vulnerable to factors such as depreciation in the Canadian dollar, which can contribute to rising import costs.
ROGER: Are some sectors harder hit than others?
LJ: That’s a bit difficult to say. What is important to emphasize is the impact on households. According to the latest data from Statistics Canada, roughly one in five households is facing moderate or severe food insecurity. So it’s important to keep that broader context in mind.
ROGER: When I mentioned sectors, I meant things like dairy, meat or farms. Are some of those being hit harder than others?
LJ: It really depends on the types of price pressures those sectors face. For sectors that rely heavily on fresh food imports or imported inputs, those are particularly vulnerable to price pressures.
ROGER: And with consumers, are they changing their spending habits?
LJ: Yes, there is some evidence suggesting Canadian households are adapting their spending habits. A recent Bank of Canada research report looked into this, and the evidence suggests households are changing the way they shop and spend.
ROGER: LJ, we have to wrap it up there, but thank you very much for joining us.
LJ: Thank you again for having me.
ROGER: LJ Valencia is an economist at Desjardins.
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This BNN Bloomberg summary and transcript of the March 6, 2026 interview with LJ Valencia are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
