Canadians can expect their monthly grocery bill to go up significantly this year, according to a new projection that says rising agriculture prices will soon trickle down to supermarkets.

The report from Capital Economics says food price inflation is set to increase from its current rate of just below 2 per cent, to nearly 5 per cent later in 2011.

That would mean a monthly grocery bill of $600 for a family of four, would climb to $630. A $9.99 box of chicken wings would go up by .50 cents and a loaf of bread worth $3.20 would increase by .16 cents.

David Madani, an economist with Capital Economics, and the author of the report, said the "strong increase" is a direct reaction to rising agricultural prices.

"Given the past increase in agricultural commodity prices, that this will lead to substantially higher consumer price index food price inflation later this year," he told CTV.ca.

"It's definitely going to be a strong increase but what's important to understand is it's entirely consistent with historic movements between global agriculture prices and consumer price index food inflation."

The increases in those prices have been broad-based, affecting everything from grains, rice and sugar, to oils and fats.

Madani said there tends to be a lag of between six months and a year between the time agricultural prices go up for manufacturers, and the time that the increase is reflected on supermarket shelves.

He also said the 2011 increase will be temporary, blaming weather-related calamities such as the flooding in Australia as the primary driving factor for the rising prices.

"What that means is production, harvesting, will be down," Madani said.

"That will lead to stronger drawdowns on available inventory and this results in tighter global supply and demand balances, so as a result of that we get higher prices."

The approximately 3 per cent rise in food inflation will add .8 percentage points to Canada's overall inflation rate later this year, he said.

While consumers will feel the pain in the short term, with grocery bills increasing, Madani said the rise will be short-lived and the food inflation rate will return to normal next year.

"Our expectation is that next year we'll see these prices come back down because presumably production will rebound, weather permitting," he said.

"With the rebound in production we would expect that a lot of these prices will fall back down again and of course what that means at the end of the day is that the spike...will prove to be temporary."

A food inflation rate of 5 per cent isn't unheard of.

In 2007 and again in 2004 the rate was close to 4 per cent, and in 2001 the rate approached 5 per cent, Madani said, noting that in every case, the rise was directly linked to world commodity prices.

Statistics Canada's consumer price index summary for December showed an increase in the price of many food products, from a year earlier. Overall, food prices went up 1.7 per cent.

Following are some typical grocery story products with the price increase or decrease between December 2009 and December 2010 shown as a percentage.

  • Meat: 3.8 per cent
  • Fish and seafood: -2.8 per cent
  • Dairy products and eggs: 0.7 per cent
  • Bakery products: 1.4 per cent
  • Rice: -2.4 per cent
  • Pasta: 5.7 per cent
  • Fruit and nuts: 1.7 per cent
  • Vegetables: -3.0 per cent