The end of cheap food?

Global food inflation has fallen from the peaks seen during the pandemic, but questions remain about whether food prices will return to historical norms. Our analysis suggests several forces could keep food inflation elevated over the longer term.

Key drivers that could contribute to a structurally higher food inflation environment:

1. Climate-related disruptions to food production, including the impact of extreme weather events such as heatwaves and a developing El Niño event
2. Weak farm profitability limiting investment and resilience
3. Higher livestock welfare standards increasing production costs
4. Rising labour costs across the food supply chain
5. Demand growth continuing to outpace supply

Together, these factors are shifting the conversation from food prices alone to broader concerns around food security and supply resilience.

While many of the same pressures are being felt around the world, their impact varies by market. The UK and Europe face multiple structural challenges, while markets such as India benefit from productivity gains and policy support. Elsewhere, weather risks, competitive dynamics and supply chains are creating different inflation outcomes across regions.

Advances in agricultural technology have the potential to improve productivity, increase yields and strengthen food supply resilience. Areas such as precision agriculture, automation and biotechnology continue to attract investment.

However, adoption remains gradual, and technology alone is unlikely to fully offset the pressures affecting food production in the near term.

Persistent food inflation could have wider implications for how households allocate spending. As food accounts for a larger share of household budgets, consumer spending patterns may continue to evolve, particularly across more discretionary categories.

The broader message is clear: food inflation is increasingly influenced by long-term structural factors rather than temporary shocks, making resilience and security of supply growing priorities for consumers, businesses and policymakers alike.