April’s rise in grocery prices may be only the beginning of a longer, steeper stretch of food inflation that could surpass historic norms by the year’s end as fallout from geopolitical tensions and tariffs filter through the supply chain and reach consumers at shelf, experts predict.
Earlier this week, the Labor Department reported a 0.7% increase in the price for food consumed at home in April, driven in part by higher fuel and fertilizer prices caused by ongoing military conflicts in the Middle East, Ukraine and Russia as well as a blockade in the Strait of Hormuz.
But that is only the short-term impact and by the end of the year grocery prices could increase closer to 4% to 4.5% compared to the previous year, warned Richard Volpe, a former USDA economist and California Polytechnic State University professor.
“The USDA Economic Research Service is now forecasting grocery price inflation to be at or even slightly above the historical normal,” but “I do think that food price inflation is probably going to tick up above the rolling 20-year average” of 2.6% to be “closer to 4% or 4.5% for the year,” he said.
If true, this would be notably higher than the 1.2% increase in grocery prices in the US in 2024 and almost as high as the 5% increase in 2023, although no where near the peak 11.4% increase in 2022.
While Volpe said he hopes he is wrong, he said that “even if the conflict were to be resolved today with a full withdrawal and the Straight of Hormuz opens, I think, unfortunately, we’re going to be seeing some of these impacts filtering into the food system well into the late summer and into the fall” or even early 2027.
He explained that much of the impact from fighting in the Middle East currently is hitting farmers who are facing significantly input costs from fertilizer and fuel.
“By some industry estimates, the price of fertilizer has effectively doubled for American ag producers and that has the biggest impact on our row crop producers – so corn, wheat, soybeans, rice and barley, which are the foundation of our food supply chain,” he said.
“These fertilizer costs really aren’t going to have a significant or substantial impact on commodity prices until it is time for harvest and storage and distribution and manufacturing and processing, which means we are looking at months down the road,” he explained.
Higher inputs are not the only costs for manufacturers that could rise. Lower yields and productivity also could drop, tightening supplies and driving-up prices, he said. He explained that some farmers are “making hard decisions about acreage application levels” for fertilizers and others are flipping from corn, which is a heavy feeder, to soybeans for some of their acreage, which could have knock on implications for both food and energy prices.
“That is something that has not hit yet,” he said.
Tariff trouble ahead
The full impact of Trump’s tariffs also has yet to be felt and will continue to place pressure on stakeholders across the supply chain, Volpe said.
“There is a narrative that maybe this talk about tariffs on food was much ado about nothing. I don’t really agree with that,” he said.
He explained that while some food-related tariffs were exempted or reduced, there is still a 10% tariff on most foods and some foods, like tomatoes, that were once exempt now are not.
According to the most recent Consumer Price Index, the price of tomatoes increased a whopping 15.1% from March to April on top of a 15.3% increase from February to March. Year over year, the price is up 39.7% for tomatoes.
“That is largely a passthrough,” Volpe said.
Tariffs take a toll on packaging
The impact of tariffs on packaging costs also is starting to show, and will likely become steeper before slowing, Volpe said.
For example, he noted, the price of steel and aluminum – half of which the US imports from Canada and China – is up due to tariffs and in even shorter supply due to the conflict in Iran, which is making international transportation more expensive.
“That is a big reason why, if you look at these more recent CPI releases, we’re seeing significant jumps on things like canned and frozen fish and seafood and fruits and vegetables and non-alcoholic beverages,” he said.
In April, the price of carbonated drinks, which are often sold in aluminum cans, rose 0.8% over March and is up 3.7% for the year. Nonalcoholic beverages and beverage materials more generally increased 1.1% for the month and 5.1% for the year.
Plastic prices also are climbing and could have a more dramatic impact on packaged food than aluminum and tin, Volpe noted.
Plastic is “absolutely crucial for the end packaging. I can’t think of a single food department or category that doesn’t rely on plastic to some extent. And, of course, plastic is dependent on oil,” so “we can absolutely expect to see plastic prices increase,” he said.
According to the April Producer Price Index released earlier this week the price for unsupported plastic film, sheet and other shapes increased 5.6% over March and is up 10.5% for the year. Plastic packaging products increased 0.7% month-over-month and is up 1% year-over-year. Plastic resins and materials are up 4.5% in the month and 1.8% for the year.
Paper packaging is also up following the closure of some mills in the US, added Andy Harig, vice president of tax, trade, sustainability and policy development with FMI – The Food Industry Association.
‘X factors’ pushing up prices
The third reason that Volpe expects grocery prices to rise above the 20-year rolling inflation level is a series of “X factors” that are converging to pressure prices in key food and beverage areas.
Among these is the weather and a high risk of drought later in the year in key growing regions.
“It has been a very, very strange winter in California,” where much food is grown," Volpe said. “It has been warm and it has been wet, and California has received plenty of rain … and the reservoirs are full. But, unfortunately, because it has been so warm, there is effectively no snowpack” in the mountains, on which farmers rely for water in the hotter months of the growing season, Volpe said.
This will prompt some farmers to draw water from the ground, but the process is energy intensive and they will face higher energy costs, he added.
“I’m not … saying that we’re going to run out of fruits and vegetables. Nothing like that. But we can expect to see food price inflation for these to stick around and to actually intensify towards the end of the growing and harvesting season, late summer,” he explained.
Another X factor are diseases attacking key crops. For example, citrus greening, for which there is no cure, and fusarium wilt, which is a destructive, soil-borne fungal disease that blocks plants’ water absorption.
“These supply chains are dealing with structural problems, and we really shouldn’t expect prices in these categories to come down anytime soon,” he said.
What does this mean for food brands?
Taken together, these factors along with other pain points – like the price of refrigerant, rubber and transportation – give weight to Volpe’s prediction that grocery inflation will continue to rise through 2026 and could quickly surpass the rolling average for the past 20 years.
How much of this brands can pass along to consumers remains to be seen. Many shoppers already feel squeezed and are buying on promotion, trading down and going without – a grim reality that likely contributed to a dramatic drop in the overall consumer sentiment in May to 48.2 out of 100, according to the University of Michigan.
