The grocery inflation shock of 2021–23 — when food-at-home prices in the US rose 13.5% and UK food prices hit 19% — has largely resolved in advanced economies. The base effects from those extreme 2022 readings are now fully washed out of the annual comparisons, and underlying food price trends have returned to something close to normal. The FAO Food Price Index stands roughly 22% below its March 2022 peak. For most households in advanced economies, the grocery inflation emergency is over.
Why it could return: three 2027 risks
1. El Niño aftermath effects on Southern Hemisphere crops: El Niño 2023–24 was one of the strongest on record. Its primary effects on crop yields are typically felt with a 12–18 month lag as the following growing season reveals drought or flood damage to key producers. Argentina and Southern Brazil — major wheat, soy, and corn exporters — saw below-average yields in their 2024–25 harvests. If the 2025–26 harvests also underperform (as some agricultural analysts project), grain prices could rise by 10–20% in H1 2027, adding meaningfully to food CPI. For background, see our 2026 global food inflation analysis.
2. Fertiliser cost re-acceleration: European natural gas prices (TTF) fell dramatically from their 2022 highs and supported lower fertiliser costs through 2025–26. But TTF spot prices have partially recovered in late 2026 as European gas storage refilling creates seasonal demand. Natural gas accounts for roughly 80% of the cost of nitrogen fertiliser production (ammonia). A 20% rise in European gas prices translates to roughly a 10–15% rise in fertiliser costs for the 2027 growing season. Higher fertiliser costs typically pass through to food prices with a 6–12 month lag — timing the potential impact to H2 2027.
3. Black Sea grain route uncertainty: The Black Sea grain corridor, which allowed Ukrainian wheat and sunflower exports to reach global markets, remains fragile. Ukraine accounts for approximately 10% of global wheat exports and 45% of sunflower oil exports. Any renewed disruption to these routes would disproportionately affect food prices in North Africa, the Middle East, and parts of Asia — with second-round effects on global commodity prices.
Implications for central bank policy
A food price re-acceleration in 2027 would complicate the picture for central banks that have been hoping for continued disinflation. The Fed, ECB, and BoE all typically "look through" one-off food price shocks — treating them as transitory rather than demanding a policy response. But if food price rises coincide with sticky services inflation (as in early 2027), it could keep headline above target for longer than expected, testing central bank patience. The key question is whether food price rises remain supply-side shocks or begin to feed into broader wage demands — particularly in food services and retail, where worker bargaining power has increased post-pandemic. Our supply shock term explains how central banks typically treat these episodes.