Rising energy costs, supply chain pressures and potential El Niño disruptions threaten to push food price inflation higher after months of relatively modest growth.
The relative calm in supermarket prices may be coming to an end, and the grocery industry could be facing another difficult stretch heading into 2027.
That’s the warning from Dr. Ricky Volpe, professor of agribusiness at California Polytechnic State University, who told reporters during an FMI – The Food Industry Association briefing Nov. 12 that sustained energy inflation and emerging weather disruptions could drive above-average monthly grocery price increases for the next four or five months.
“I would expect above-average month-over-month food price inflation for the next four or five months just based on those two factors: energy costs and then weather disruptions,” Volpe said.
He added that he would be surprised to see food prices remain flat or decline during that period.
October’s Increase Is a Warning Sign
The warning comes after grocery prices increased 0.4% in October, following three preceding CPI reports showing essentially flat food-at-home prices. Volpe correctly predicted the inflation we experienced last month.
That 0.4% increase might not look alarming on its own, but sustained over 12 months, monthly increases of that magnitude would produce approximately 4.9% annual inflation – roughly twice the historical grocery inflation rate of 2% to 2.5% cited by Volpe.
And while nobody is predicting that exact outcome, the latest figures suggest the period of relatively stable grocery prices may be ending.
Volpe emphasized that 2026 has been an unusual year, with increases in some categories offset by flat or declining prices in others. The result has been relatively moderate overall inflation despite considerable pressure throughout the supply chain.
The concern now is that those pressures are becoming too difficult to contain.
Energy Costs Are Catching Up With the Food Industry
Diesel fuel, natural gas and industrial electricity have been climbing for months, creating higher expenses for virtually everyone involved in producing, processing, transporting and selling food.
Since January 2024, retail food prices have increased slightly more than 5%, Volpe said, even as several upstream costs have risen much faster.
That disparity suggests the food industry has managed to keep at least some of those higher expenses from reaching consumers, whether through sourcing changes, automation, transportation efficiencies and/or ingredient substitutions.
But those strategies can only do so much.
“Looking at these sustained cost pressures over the last two, two-and-a-half years does make me concerned that we’re going to see retail food price inflation remain somewhat elevated through the end of the year and probably into early 2027,” Volpe said.
Energy accounts for approximately 3% to 4% of the retail food dollar, according to Volpe. Its impact is therefore smaller than the headline increases in fuel and electricity prices might suggest, but it is spread across nearly every part of the food system.
Weather Could Make Matters Worse
The developing El Niño weather pattern introduces an X-factor, another complication.
Volpe identified palm oil, rice, cocoa and coffee as commodities potentially vulnerable to weather disruptions in major producing regions. Even when the United States produces enough of a commodity domestically, disruptions elsewhere can affect global prices and, ultimately, American consumers.
Closer to home, bad weather in the southeastern United States, western Mexico and Southern California has already contributed to higher prices for certain vegetables and other fresh commodities.
Beef and veal face their own challenges, including tight cattle supplies, strong demand and higher production expenses. Fluid milk is quite exposed to rising transportation and refrigeration costs.
Not every agricultural region will suffer from El Niño, and Volpe acknowledged considerable uncertainty about its eventual effects. But the prospect of additional supply disruptions comes at a particularly inconvenient time for the food industry.
Consumers Have No Appetite for More Increases
The timing isn’t ideal for supermarket operators, either.
FMI research presented during the briefing found that 62% of shoppers believe their incomes are falling behind inflation, while 65% remain extremely or very concerned about grocery prices.
Another 72% said they are doing okay financially, provided they stick to their budgets.
That’s not exactly a consumer base eager to absorb another round of price increases.
Retailers are already competing aggressively on promotions, private brands and loyalty discounts. Additional inflation could force them to choose between passing higher costs along to customers and absorbing more of those expenses themselves.
Volpe declined to attach a specific inflation forecast to early 2027 and acknowledged that his original outlook for 2026 had been more pessimistic than actual results.
Still, the underlying cost trends don’t offer any encouragement.
“There’s not a whole lot that’s moving in the right direction in terms of keeping food prices flat or down right now,” he said.
It’s entirely possible the moderating inflation rates of recent months may turn out to be a temporary reprieve, and not the beginning of a lasting return to stability.