Food-at-home inflation could begin accelerating again as higher energy, transportation and agricultural costs work their way through the supply chain, according to food economist Ricky Volpe.
Speaking during an FMI-The Food Industry Association media briefing Sept. 17, Dr. Ricky Volpe, associate professor of agri-business at Cal Poly, said August’s relatively favorable grocery inflation numbers do not fully reflect the cost pressures now affecting farms, manufacturers, warehouses and distributors.
“I’m not ready to celebrate yet,” said Volpe, a professor of agribusiness at California Polytechnic State University. “I will be surprised if we don’t see food price inflation tick up somewhat for the last quarter of 2026.”
The Consumer Price Index rose 0.4% in August and was 3.4% higher than a year earlier. Food-at-home prices were unchanged from July and increased 2.2% year over year, down from a 2.7% annual increase in July.
The flat monthly reading masked significant variation among grocery categories. Fruit and vegetable prices declined, helping offset increases elsewhere in the store.
Volpe said the next round of price pressure is likely to come partly from higher energy costs. Producer-price data for crude oil, diesel fuel, industrial electricity, warehousing, cold storage and long-haul trucking increased during August, he said.
Transportation costs can begin affecting retailers within weeks as distributors pay more to move food from warehouses to stores. Higher cold-storage, manufacturing, harvesting and agricultural-production costs take longer to reach the shelf.
“Even if the creep stopped and reversed today, we should see impacts on food prices, marginal though they may be, for at least the next three months as a result of the spike in diesel prices,” Volpe said.
Andrew Harig, FMI vice president of tax, trade, sustainability and policy development, said the effects could extend into future planting and production decisions because farm equipment, transportation and other agricultural operations depend heavily on diesel.
Volpe also pointed to fertilizer costs that rose following the conflict involving Iran and the disruption of traffic through the Strait of Hormuz. Those increases affected farmers during planting but may not become visible to grocery shoppers until after crops are harvested, processed, transported and manufactured into consumer products.
The USDA’s current Food Price Outlook midpoint projects food-at-home inflation of approximately 2.5% for 2026. Volpe said inflation could instead finish above its historical average, possibly around 2.7% or 2.8%.
“The pieces are in place for that, given everything that’s going on right now,” he said.
The outlook does not suggest a return to the exceptional food-price increases that followed the COVID-19 pandemic. However, Volpe said retailers and manufacturers have already been attempting to restrain prices while operating with narrow margins.
FMI said food-at-home prices have increased more than 30% since January 2020, while food retailers have averaged a 2.3% net profit margin over that period.
Volpe said those efforts to absorb or delay increases cannot continue indefinitely as energy, commodity and distribution costs rise.