Canadians Must Prepare for Higher Food Prices

A prolonged war between the U.S., Israel and Iran, will push up food prices around the world, and at home.

The Cost of Eating May Surge

A war between the United States/Israel, and Iran is already pushing food prices higher around the world, and Canadians are starting to feel it at the grocery store. Even though the war is happening far away from Red Deer, Saskatchewan, and every other place in Canada, the systems that produce and deliver food are global.

When something major breaks in one part of that system—especially in a region tied closely to energy—it shows up quickly in everyday costs everywhere around the world.

The biggest driver behind rising food prices right now is energy. This is because modern agriculture runs on fuel. Tractors, irrigation systems, food processing plants, and transportation networks all depend on oil and gas. Fertilizer production, in particular, relies heavily on natural gas. As the war disrupts oil flows—especially through critical routes like the Strait of Hormuz—energy prices climb. Once fuel becomes more expensive, everything tied to food production becomes more expensive, too. That increase doesn’t stay at the farm level; it is passed along to consumers.

In Canada, distance and climate make this worse. Fresh produce often comes from the United States, Mexico and South America, travelling thousands of kilometres before reaching store shelves. Even domestically produced food, like grains from the Prairies, must be transported long distances by rail or truck. As fuel costs rise, so does the cost of getting food to market, and that gets reflected in prices almost immediately.

Fertilizer is another pressure point. Canadian farmers' production depends on fertilizer, and these prices are mostly set globally. With supply chains tightening and natural gas prices rising, fertilizer is becoming more expensive and less predictable to source. Farmers are left choosing between paying significantly more to maintain yields or cutting back and risking smaller harvests. Neither option helps consumers. Higher input costs or lower output both lead directly to higher prices.

LNG Shutdowns Are Making the Situation Worse

A major and often overlooked part of this story is natural gas—specifically liquefied natural gas (LNG)—which is a critical input (feedstock) for both fertilizer and electricity production.

Right now, large parts of LNG production in the Gulf are offline. Iran’s strikes hit key facilities in Qatar, including Ras Laffan, the world’s largest LNG export hub, forcing it offline. Estimates suggest up to 20% of global LNG has been taken offline due to the shutdown.

The damage is not just temporary. These facilities cost upwards of $20 billion to build, and it will take years to fully repair. Even in the best-case scenario, restarting operations takes weeks, not days, because LNG infrastructure is complex and highly sensitive.

The situation is not limited to Qatar. The broader Gulf region—including Bahrain—has seen reduced production and export capacity due to attacks, instability, and shipping risks. On top of that, LNG tankers are struggling to navigate the Strait of Hormuz, further limiting supply even when production is available. These disruptions push natural gas prices higher, and when gas prices rise, so do fertilizer, food processing, and transportation costs. This is one of the clearest links between the war and rising food prices.

Closed Shipping Lanes Are Amplifying the Impact

The majority of global trade moves over seas and through several key maritime routes. Conflict at or near those routes riskier and more expensive to use. Insurance costs go up, shipping companies reroute vessels, and delays become more common. As shipping costs rise and reliability declines, those added costs can show up directly in grocery prices.

Even food grown in Canada isn’t shielded from global pressures. Prices for major crops like wheat, corn, and soybeans are set on international markets. When supply is threatened or uncertainty rises anywhere in the world, prices increase everywhere. Canadian farmers may receive more for what they sell, but that same increase feeds into the cost of everyday foods.

There are also behavioural impacts. When uncertainty rises, governments and companies start stockpiling. That reduces the amount of food available on global markets, which pushes prices higher. At the same time, investors move money into commodities like food during periods of instability, adding further upward pressure.

Currency shifts are adding another layer. Global instability tends to strengthen the U.S. Dollar which puts pressure on the Canadian Dollar. Since many food imports are priced in U.S. Dollars, a weaker Canadian Dollar means paying more for the same goods.

Why Higher Interest Rates Won’t Bring Food Prices Down

As inflation rises, central banks—including the Bank of Canada and the Squirmer—will consider raising interest rates to try to bring inflation under control. Normally, this works by cooling demand. People borrow less, spend less, and businesses slow down their investment.

But what’s happening with food right now isn’t driven by demand—it’s driven by supply problems. Energy is more expensive, fertilizer is harder to get, and shipping is disrupted. Raising interest rates doesn’t fix any of those things. It doesn’t bring LNG facilities back online, lower oil prices, or increase crop yields.

In many cases, higher interest rates will actually add pressure towards even higher prices. Farmers rely on credit to operate—whether it’s for equipment, land, or seasonal expenses. When borrowing costs rise, farming becomes more expensive. That can limit production or further increase costs, both of which feed back into higher food prices.

“I realize that’s going to impact Canadians. Unfortunately, we can’t fix the war.” - Tiff Macklem, Governor of the Bank of Canada

At the same time, higher interest rates slow the overall economy. That might reduce spending in some areas, but food is not optional. People adjust their buying, but they still have to eat. So food prices stay high even as the rest of the economy weakens.

For households, this is already showing up as steadily rising grocery bills. Lower-income Canadians are feeling it most, since food takes up a larger share of their budget. Food banks are under more pressure, and governments are facing growing calls to respond.

In the end, the connection is straightforward. The war disrupts energy. Energy powers farming, fertilizer production, and transportation. LNG outages—especially in Qatar and across the Gulf—are tightening supply even further. Those pressures move through the system and land where people see them most: at the grocery store.

IceCap Strategy

Food agriculture has become a core holding for IceCap portfolios, providing exposure to corn, soy, wheat, coffee, live cattle, and more. This isn’t an investment in companies involved with growing food or fertilizer; it is the actual food itself. While rising food prices will not be pleasant for families shopping at their local grocery store, at least there is a way to actually benefit from this unpleasant experience with your wealth and savings.

-Keith Dicker