The grocery industry may be facing another round of inflationary food-cost pressure from two of the most basic commodities in the food system: wheat and corn. But unlike the cost of eggs where we saw a tsunami of increased prices and then a sharp plunge, the circumstances elevating corn & wheat prices looks more like a persistent flood that isn’t going anywhere.
Wheat prices have surged to their highest levels in roughly three years, while corn prices have climbed sharply heading into harvest. The reasons are somewhat different, but the underlying story is similar: supplies are tighter than expected, demand remains strong and farmers are operating with unusually high production costs.
It’s important because wheat and corn are not niche commodities. Wheat is fundamental to bread, pasta, crackers, cereals and baked goods, while corn is used in everything from sweeteners, starches and oils to animal feed and ethanol. Higher grain prices have the potential to affect multiple grocery categories, both directly and indirectly.
Wheat Has a Supply Problem
The wheat market is particularly exposed to supply concerns. According to the August USDA World Agricultural Supply and Demand Estimates report, U.S. wheat production for the 2026/27 marketing year is projected at 1.531 billion bushels, down from 1.985 billion bushels in 2025/26.
That represents a decline of roughly 23% and would make this the smallest U.S. wheat crop since 1971.
Total U.S. wheat supplies are forecast to fall 13% from the previous year, while the Great Plains winter wheat crop is down 29%. The supply problem also extends beyond the United States. Russia and Ukraine accounted for roughly 32% of global wheat trade last year, according to USDA figures, making continued disruption in the Black Sea region particularly significant.
Europe has also experienced unfavorable growing conditions, with USDA reducing production expectations for the European Union and United Kingdom. The result has been a substantial move in wheat prices.
Wheat was roughly $7.44 per bushel at the end of August, with prices having climbed more than 40% over the previous year. The market approached $7.70 per bushel in late August, its highest level since early 2023. Montana wheat prices had risen to approximately $6.45 per bushel from about $4 a year earlier.
Higher commodity prices, however, do not necessarily mean farmers are suddenly enjoying large profits. American Farm Bureau Federation data show labor costs have increased 74% since the 2018 Farm Bill, fertilizer costs are up 54% and overall farm production costs have increased approximately 40%.
That distinction is important to understanding the inflationary effect. The farmer may see a higher commodity price without seeing a corresponding improvement in margins, while the higher cost nevertheless moves into the next stage of the supply chain.
Corn Is a Different Problem
Corn is showing a similar pattern, although its market is being driven by a different balance of supply and demand. The USDA’s August forecast put the 2026 U.S. corn crop at approximately 16 billion bushels, which would be the second-largest harvest on record. Yet USDA reduced its projected yield to 180.7 bushels per acre, down 2.3 bushels from its previous forecast.
At the same time, USDA increased projected 2026/27 corn use by 75 million bushels and raised exports by the same amount to 3.3 billion bushels because of stronger global demand and constrained Ukrainian exports. Projected ending stocks fell to 1.7 billion bushels, 137 million below the previous forecast, while the projected season-average farm price increased 10 cents to $4.50 per bushel.
That explains why a seemingly large corn crop is not necessarily translating into cheap corn. Corn has been rallying into harvest despite the normally bearish seasonal environment. The strong demand and questions about actual yields are helping to drive the market. A recent crop tour produced average yield estimates in the 170s bushel count, considerably below USDA’s current 180.7-bushel forecast.
If USDA reduces its estimate again, analysts said the market could require higher prices to ration demand.
Corn’s importance to grocery is also broader than its role as a food ingredient. USDA’s Economic Research Service says corn accounts for more than 95% of U.S. feed-grain production and use. Roughly 40% of domestic corn use typically goes toward livestock feed, while food, seed and industrial uses account for the remainder. Ethanol alone consumed approximately 5.44 billion bushels of corn in the 2024/25 marketing year, about 36% of total U.S. corn use.
That creates a much broader transmission mechanism for higher corn prices. More expensive corn can increase the cost of packaged foods through starches, sweeteners and oils, while also raising feed costs for cattle, hogs and poultry.
The Costs Do Not Stop at The Farm
A loaf of bread incorporates wheat, but also milling, packaging, labor, energy, transportation, warehousing, distribution and retail costs. The same is true across almost every food category. The problem for the grocery industry is that many of those other costs are already elevated.
Food-at-home prices were still 2.7% higher in July 2026 than a year earlier, according to the Bureau of Labor Statistics, while cereals and bakery products were also up 2.7%. USDA’s Economic Research Service currently expects food-at-home prices to increase about 2.5% during 2026.
The latest grain-price increases therefore add another layer to an already expensive food system. Wheat moves directly into bakery, pasta and grain-based products. Corn enters packaged foods through sweeteners, starches and oils, while also affecting meat, poultry, eggs and dairy through feed costs.
The potential impact is particularly significant because the industry is dealing with several other commodity and supply pressures at the same time. USDA, for example, expects beef and veal prices to increase 9.8% in 2026, while July beef prices were already 9.4% above the previous year.
A Broader – And Bigger – Inflation Problem
The most important implication for grocery executives may not be the direct cost of wheat and corn, but the second-order effects. Wheat and corn sit underneath a remarkably large portion of the food system, meaning that sustained increases can spread through manufacturers, processors, animal agriculture, distributors and ultimately retailers.
Neither commodity needs to return to its pandemic-era highs to create additional food inflation. They simply need to remain elevated long enough for manufacturers, distributors and retailers to exhaust their ability to absorb the increases.
The next grocery inflation story may not come from one dramatic shortage. It may come from the cumulative effect of two of the food system’s most important commodities becoming more expensive and remaining elevated. It adds another layer of pressure to a grocery industry that has yet to fully escape the higher-cost environment created over the past several years.