Energy costs and weather extremes drive food sector inflation concerns

Food prices have stabilized at a higher level following the inflation peaks of recent years, but rising energy costs and agricultural pressures are creating new economic tensions. While some food categories like legumes, sugar, chocolate, and eggs saw significant increases in previous years, the overall cost of food, beverages, and tobacco was approximately 0.5% lower in August 2026 compared to the previous year.

In contrast, energy costs have surged, with energy including motor fuels rising 11.7% year-on-year as of August 2026. This increase in energy and fertilizer prices often impacts food prices with a delay due to their role in production, processing, packaging, and transport.

Analysis from ABN Amro indicates that food sector margins are under pressure as retailers remain hesitant to pass all cost increases to consumers. Upward pressure is being driven by extreme weather events in Europe and the United States, which have lowered summer crop yield forecasts in the EU by an average of 7% below the five-year average. Other contributing factors include rising labor costs and the potential impact of El Niño, leading to expectations that food inflation may rise again in late 2026 and throughout 2027.