Food Inflation Persists Despite Easing

While overall food prices are predicted to rise 3.1% in 2026, the cost of eating out is expected to increase faster than groceries. Prices for food-away-from-home are forecast to climb by 3.7%, exceeding their 20-year historical average, while food-at-home (grocery) prices are predicted to rise by a slower 2.5%. The pressure on grocery bills comes from a variety of factors, including the high cost of farming inputs. Since 2020, farmers have seen significant increases in production expenses, with fertilizer costs jumping 12% between 2021 and 2022 alone. Marketing, storage, and transportation expenses have also surged, putting a strain on farm profitability and contributing to higher prices for consumers. A key driver of these rising costs is energy prices. The conflict in Iran has already caused a spike in global diesel prices as the Strait of Hormuz, a critical route for about one-fifth of the world's oil and gas, faces disruptions. This directly impacts the food supply chain through higher transportation costs for fresh produce and meat. The conflict also threatens the global supply of fertilizer. Roughly 25% to 35% of the raw materials for fertilizer pass through the Strait of Hormuz. Any prolonged disruption could lead to lower crop yields and, consequently, even higher food prices for consumers down the line. Beef prices remain a significant concern, with a predicted increase of 9.4% in 2026. This is largely due to a U.S. cattle herd that has shrunk to historic lows. In contrast, after major price spikes in previous years due to avian flu, egg prices are now expected to decrease by a significant 27.4% in 2026 as production recovers. In response to these persistent high prices, shoppers are actively changing their habits. A large majority of consumers report adjusting their buying behaviors, with many opting for lower-priced alternatives like store brands. Many are also stocking up during sales, buying fewer items overall, and using more coupons to manage their grocery budgets. Looking ahead, the U.S. government is in the process of negotiating the new Farm Bill, a major piece of legislation that will shape food and agriculture policy for the next five years. The bill includes funding for nutrition assistance programs like SNAP, which could see changes that impact food affordability for many households. At a local level, some authorities are taking direct action. New York City, for example, is implementing new food standards for its city-run agencies that will shift millions of meals towards plant-based options and place stricter limits on processed meats and additives, set to take effect in July 2026.