The IGD’s latest food inflation forecast provides grim reading for both industry and consumers alike, as global climate shocks and intensifying disruption in the Middle East continue to push up the cost of food.
Painting a stark picture, the latest figures put average inflation at between 2.9% and 3.9% for 2026, rising to between 5.6% and 6.6% in 2027 and between 5.3% and 6.3% in 2028.
IGD analysts say that although plentiful food stocks at the start of the year, hedging and moderate demand have helped retailers absorb costs, those buffers are expected to weaken as political and climate-related pressures drive up the cost of doing business.
Put simply, the institute says, the higher inflation it had previously predicted for 2026 has not disappeared, but has instead been deferred, with price pressures expected to exacerbate the cost-of-living squeeze throughout 2027 and “remain elevated” into 2028.
In particular, IGD is sounding the alarm over the potential impact of El Niño, which it has classified as a high-severity risk.
Set to affect major food-producing regions, it is forecast to be an extremely severe event, with impacts on yields, quality and availability likely to persist well into 2027 and beyond.
Category-wise, fruit and vegetables are expected to make the largest contribution to higher food inflation, according to IGD, due to shorter production cycles and a high sensitivity to weather conditions.
Other food and non-alcoholic drink categories are also expected to make significant contributions, with most grocery products exposed to inflationary pressures such as energy costs, regulatory change and supply chain disruption.
James Walton, chief economist at IGD, said: “Food inflation’s current weakness will not last. Stock buffers and hedging have delayed, not removed, the pressure building from disrupted energy markets and extreme weather. Shoppers have already adapted to repeated periods of high food price inflation. Many have changed how and where they shop, switched products or reduced discretionary spend, leaving fewer options available to absorb any further price rises.
“For businesses, this reinforces the need to look beyond short-term mitigation and focus on strengthening the resilience of the food system. Greater productive capacity, ideally domestically where appropriate, would help improve resilience across the food system. Combined with stronger productivity, this could support the industry’s contribution to UK economic growth and help drive more stable pricing over time.”
