Food Prices Face Fresh Pressure Into 2027 as Shipping Disruption and Drought Hit Supplies

Global food prices are facing renewed pressure into 2027 as shipping disruptions, higher fertiliser costs and drought threaten supplies of wheat, rice and other staples, raising the prospect of higher grocery bills for UK households.

The United Nations Food and Agriculture Organization (FAO), which monitors global agricultural markets, said its Food Price Index averaged 136.0 points in September 2026, its highest level since November 2022. The index rose 1.5% from August, driven by cereals, sugar and vegetable oils.

The pressures are converging across major food-producing regions and transport routes. Attacks on grain infrastructure in the Black Sea, disruption linked to the conflict involving the US, Israel and Iran, and dry weather in parts of Asia are adding to supply risks. UK industry forecasts point to stronger food inflation in 2027, although the scale and timing of any supermarket price increases remain uncertain.

Shipping Disruption and Drought Put Pressure on Food Supplies

Wheat prices have risen by more than 30% in 2026, while rice prices in key Asian exporting countries have increased by 10% to 13%, Reuters reported. Indonesia has recorded record-high rice prices amid forecasts of delayed rains, while a weak monsoon has put pressure on India's sugar production.

The FAO's September figures show the breadth of the increases. Its Cereal Price Index rose 5.1% month on month and 17.2% year on year. The vegetable oil index climbed 0.9% from August and stood 18.3% above its level a year earlier. Sugar prices rose 6.1% during the month, reaching their highest level since April 2025.

Transport and farm input costs are adding to the strain. Disruption around the Strait of Hormuz, a key maritime passage for global energy supplies, has raised concerns about fuel and fertiliser shipments amid the conflict involving the US, Israel and Iran. Freight rates have risen about 50% on some key routes, such as the Black Sea to Southeast Asia, according to Reuters.

Máximo Torero, the FAO's chief economist, told Reuters that the combined pressures would have 'a bigger impact towards the end of the year, at the beginning of next year and potentially throughout next year'.

Global Stocks Offer Some Protection, but Risks Remain

Global cereal stocks still provide a buffer against supply shocks, although FAO data suggest that inventories are no longer expanding significantly. The FAO projects world cereal stocks of about 950 million tonnes at the end of the 2026/27 season, corresponding to a stocks-to-use ratio of 31.7%, a level the agency says still indicates relatively comfortable supplies.

Weather adds another risk. El Niño, a climate pattern that changes rainfall and temperatures worldwide, can bring drier conditions to parts of India and Southeast Asia. Poor harvests could tighten supplies into 2027.

International commodity prices do not translate directly into supermarket prices. Food processors that typically buy raw materials on three- to six-month contracts are now renewing those deals at higher prices, Reuters reported, with weaker local currencies magnifying the costs in some markets.

UK Food Inflation Forecast to Rise in 2027

The Food and Drink Federation (FDF), which represents UK food and drink manufacturers, forecasts that annual inflation for food and non-alcoholic drinks will reach 3.9% in December 2026 and average 5.5% in 2027, peaking at 6.4% in July. It cites higher energy, logistics, packaging and ingredient costs, alongside weather-related and geopolitical disruption.

The Institute of Grocery Distribution (IGD), a grocery-sector research organisation, projects average food inflation of 2.9% to 3.9% in 2026, rising to between 5.6% and 6.6% in 2027.

The FDF expects the peak to arrive later than previous forecasts suggested. Manufacturers extended their energy-hedging horizons after the 2022 energy shock, and pressure on household budgets, intense competition and retailer resistance to price increases have limited their ability to pass on higher costs.

Official figures show a more subdued picture so far. The Office for National Statistics (ONS) reported annual inflation for food and non-alcoholic beverages of 1.3% in August 2026, unchanged from July and the lowest since September 2021. Its next consumer price inflation release is scheduled for 21 October.

The FDF said inflation could come in below its forecast if households reduce their food purchases or competition for grocery market share intensifies, and above it if the Middle East conflict, the Russia-Ukraine war or extreme weather add to cost pressures.