USDA Forecasts 3.1% Grocery Price Increase in 2026, Above 20-Year Average

The USDA's 2026 food price outlook projects grocery prices will rise 3.1% this year, exceeding the 20-year average of 2.6%. Overall food prices, including restaurants, are forecast to climb 3.6%. This follows a 1.2% increase in 2024.

These increases are cumulative. Grocery prices rose 13.5% in August 2022 year-over-year. Prices did not subsequently decline; the rate of increase slowed. The 2026 projection represents a 3.1% increase on a baseline already 25-30% higher than four years ago.

Categories With Above-Average Price Increases

Eight food categories are expected to outpace their historical averages in 2026. Beef and veal lead, driven by the U.S. cattle herd reaching a historic low, which has reduced supply while demand remains strong.

Other categories projected to exceed historical averages include fish and seafood, fresh vegetables, cereal and bakery products, sugar and sweets, processed fruits and vegetables, and nonalcoholic beverages.

Contributing Factors

Tariffs on imported food ingredients are increasing costs for growers, processors, and retailers, who operate on thin margins and pass increases to consumers.

Avian influenza outbreaks have repeatedly disrupted poultry supply chains over the past two years. Flock culling requires months of rebuilding, creating price instability in egg and poultry markets for subsequent quarters.

Categories With Price Declines

Egg prices are projected to decline in 2026 compared to 2025, following the price spikes of early 2025. Dairy products and fats and oils are also forecast to decrease.

How Inflation Affects Price Levels

Inflation measures the rate of price increase, not the absolute price level. When inflation slows, prices continue rising but at a slower pace. For prices to decline in absolute terms, deflation would need to occur. Central banks generally work to prevent deflation because it can lead to a cycle of falling prices, wages, and employment.

Grocery prices from 2019 levels are not expected to return. The relevant metric going forward is whether wage growth keeps pace with ongoing price increases.

Restaurant Prices

Restaurant meal prices are forecast to rise 3.9% in 2026, outpacing grocery price increases. The cost differential between cooking at home and eating out continues to widen.

Store Brand vs. Name Brand

The quality gap between store-brand and name-brand products has narrowed for most staples. Store brands typically cost 30-40% less than their name-brand equivalents.

Beef Outlook

The cattle herd rebuilding process is expected to take two to three years, during which beef prices are projected to continue rising.