Food prices in 2026 will be a tale of two cities – with inflation projected to level out at historic averages after double-digit spikes earlier in the decade, but the impact on groceries will be far less than at restaurants, according to data presented by the US Department of Agriculture at the agency’s annual Agricultural Outlook Forum in Washington, DC, last week.
The striking division between the two could bode well for packaged food manufacturers as consumers trying to stretch their food budgets may redirect spending from restaurants to retailers.
However, not all grocery categories will benefit the same as USDA’s Economic Research Service predicts significant volatility between segments due to varying supply chain factors and input costs. Likewise, any bump in spending may not be proportionate to a drop in inflation as many consumers still feel squeezed compared to pre-pandemic, according to analysis by FMI – The Food Industry Association.
Inflation normalizes but category volatility remains
Food inflation in the US has held steady at about 3% annually for the past two decades – with one glaring deviation: The pandemic.
“The years 2020 through 2023 were a period of higher-than-average food price inflation,” with food prices spiking upwards of 10% in 2022 over the previous year, which was also much higher at 4% than 2019 when it barely touched 2%, Hayden Stewart, USDA ERS, agricultural economist, said at the USDA Ag Forum.
Since then, food prices have stabilized with growth in 2024 and 2025 dipping to 2.5% before creeping up to 3% last year, Stewart noted.
ERS predicts in 2026 this growth will hold steady at about 3% – although there is a chance it could increase to 6% based on the confidence interval.
A closer look at the data shows that prices for food at home will rise much slower than for food away from home at a predicted 1.7% compared to 4.6%,respectively.
While this is good news for grocery prices overall, it reflects the average basket spend – which can mask category volatility, cautioned Stewart.
For example, USDA predicts the price for eggs – which have become a poster child for food inflation – will fall a whopping 22.2% in 2026 with a prediction interval of down 39.5% to up 1.1%.
Likewise, cereal and bakery prices are predicted to increase 1.1%, but could drop as much as 3% or increase as much as 5.5%, according to ERS analysis.
Together, these help lower overall grocery prices. But consumers who buy beef may not feel relief when they look at their overall bill, as USDA predicts beef prices will increase 9.4% on average but could surge as high as 16.6% or dip 0.4%.
Likewise, Stewart noted, fresh vegetable prices, which dipped a bit in 2025, are predicted to increase about 2% in 2026.
3 reasons consumers still feel squeezed by grocery prices
While inflation may be slowing, and even dipping, in some categories, overall grocery bills will continue to rise for a range of reasons, according to analysis by FMI presented at the Ag Forum.
According to FMI, the average weekly grocery spend is now $170 – which is up significantly from 2020 when the average household spent $120 on groceries per week.
This also exceeds the rate of inflation in that period, noted Andrew Harig, VP of tax, trade, sustainability and policy development at FMI.
He explained the uptick in grocery spending is not just due to inflation – but rather multiple strategic shopping shifts that will likely continue to funnel funds in the segment even if or as inflation cools.
The first is many shifted discretionary spending from other areas of the household budget, such as clothing or eating out, to their grocery budget so that they could continue to feed their families the same quality and amount as before the pandemic era surge in prices.
The second “major change in the marketplace was” the entrance of Gen Z and now Gen Alpha, which “eat differently than older generations,” Harig said.
For example, they snack more and snacks “tend to be a little bit higher margin, a little bit more expensive,” he said. Likewise, they buy more fresh produce and energy drinks, which also tend to be more expensive.
Third, food is a cultural touch point for many consumers and as new products become available, many people will want to try them – at least once – even if they are more expensive.
Taken together, these shifts reveal value is no longer tied exclusively to price, Harig added.
In addition, a decline in consumer concern about rising costs suggests that shoppers may be becoming comfortable with the impact of inflation and grocery prices overall. But, Harig notes, that doesn’t mean they “feel great abut them.”
He explained that in January 2026, 62% of consumers told FMI in a rolling survey the trade group conducts that they feel very or extremely concerned about rising prices – which is high – but also 6 percentage points lower than a year ago.
What does slowing inflation mean for grocery brands and retailers?
Ultimately, analysis from USDA and FMI suggest that slowing inflation for groceries in 2026 may offer consumers a sense of stability in the coming years – even if they are unhappy currently with the year-over-year increases.
It also suggests that consumers may voluntarily increase their grocery spending as they embrace eating at home more often to offset higher restaurant prices. As it does, it could set the stage for increased competition not on price, but the perception of value.
