IGD warns food inflation may jump to 5.6‑6.6% in 2027 as El Niño intensifies
IGD chief economist James Walton warned that food inflation could rise to between 5.6% and 6.6% across 2027, after Office for National Statistics data showed the rate held at 1.3% in August. He added that the Food and Drink Federation expects 6.4% inflation in July 2027 and that the World Meteorological Organization sees a near‑100% chance the current El Niño will last until February 2027.
Inflation had been steady in recent months, helped by plentiful food stocks, manageable energy costs and the ability of buyers to hedge prices at acceptable levels. Walton said those hedges cannot be maintained indefinitely and will need to be renewed at higher costs once the current harvest’s price effects arrive. He described hedging as an educated guess about the future, noting that the industry cannot hedge away weather‑driven shocks. The IGD said the new El Niño event is already under way and is projected to be stronger than any seen in the last century.
“At some point, you need to re‑hedge at a higher price,” James Walton, chief economist, Institute of Grocery Distribution said.
At the start of 2026, grocery benefit from plentiful food stocks, manageable energy and commodity prices, and retailers were able to hedge costs at acceptable levels. These conditions allowed businesses across the supply chain to absorb some of the pressure.
What we know
The latest figures from the Office for National Statistics, released 16 September, showed food and non-alcoholic drink inflation remained at 1.3 per cent in August, unchanged from July, while inched up only 0.4 per cent over the month.
However, Walton believes the period of relative calm may be coming to an end and inflation could skyrocket to between 5.6 per cent and 6.6 per cent across 2027, a prediction supported by Food and Drink Federation data which also forecasts food and non-alcoholic drink inflation of 6.4 per cent in July 2027.
IGD predicts the new El Nino event is already underway and is expected to become unusually strong, with The World Meteorological Organization agreeing there is a near-100 per cent chance that the current event will persist through February 2027.
Buyers and traders were able to hedge at fairly acceptable prices and lock in relatively low prices for a large part of the year, Walton says.