While farmers often see direct impacts from extreme weather events, for those further along the supply chain, like manufacturers and processors, the effects are usually indirect, said Scali.
Supply chains are generally designed to keep the lowest cost in mind, meaning the risk of disruption is higher, he said, such as having one large factory instead of multiple smaller ones, or being reliant on a single source for an important input. A disruption on one part of the supply chain can create a “domino effect,” he said.
However, the COVID-19 pandemic and resulting supply chain snarls have shown companies that sometimes the lowest-cost option is too risky, said Scali. Lots of companies have mapped their supply chains, turning to multiple sources for inputs or identifying backups. “It really put everybody a step ahead,” he said. But these kinds of changes can’t mitigate every potential disruption, said Scali, and shortages and price volatility are likely to get worse.
Getting food across Canada
Extreme weather doesn’t just affect the commodities themselves, it can also disrupt transportation. Fires in Western Canada are the most recent example, Scali said, where rail lines were shut down. “Yes, you can put stuff on trucks, but there’s never enough truck capacity in the country to make up for rail. So things will be delayed, and it’ll get more expensive,” he said.
If it’s a one-time disruption, the company usually tries to absorb it, he said, but longer-term disruptions or changes usually mean prices will have to go up.
What Canadians can expect with food prices
Canadians may notice the effects of extreme weather events on their food in two ways: when prices go up, and when items are suddenly no longer available.
In November 2022, lettuce prices spiked amid a shortage of iceberg and romaine, attributed to a virus in a major lettuce-growing area in California. The following spring, the valley was hit by severe rain and storms, causing flooding.
Earlier this year, spiking cocoa futures highlighted the effects of high temperatures, weather conditions and disease in West Africa, where crop yields were damaged.
