U.S. food prices are expected to increase again this year, as market pressures like the war in Iran squeeze the supply chain from farm to grocery store.
The latest report from the U.S. Department of Agriculture shows "food at home" prices are expected to increase 3.1% in 2026.
The forecast is nearly double USDA's projection at the start of the year. At least part of the increase in inflation is due to the conflict in the Middle East and the resulting spike in oil and gas prices.
David Ortega, food economist and professor at Michigan State University, said diesel fuel is critical up and down the food supply chain.
"Tractors run on diesel. The majority of the food that gets transported here in the U.S. moves on trucks," Ortega said. "So these higher fuel costs are translating into higher costs throughout the supply chain, and eventually that's going to reach the consumer at the grocery store."
He said perishable items, like fresh produce and meat, feel the impact first because refrigerated trucks require even higher levels of diesel. Items that are primarily imported, like avocados and bananas, also face pressure from needing to travel farther distances within the U.S.
Seafood, which is typically transported by air, has also been hit immediately because of the high cost of jetfuel, according to Andy Harig, vice president of tax, trade, sustainability and policy development at FMI, The Food Industry Association.
Impacts from the war could also start to compound over time, Ortega said. For example, the increased cost of oil-derived nitrogen fertilizer could prompt farmers to apply less on their fields this season. Lower crop yields in the fall will mean less feed for livestock and could drive up the cost of beef, which already hit record highs in 2025.
While oil prices improved Wednesday when the U.S. and Iran announced a two-week ceasefire, uncertainty over negotiations has caused markets to remain on shaky ground.
Harig said it remains unclear how long the conflict will last and how severe the damage will beto the global supply of oil and gas.
But he said food processors and retailers know one thing for sure:
"It's going to impact prices, and it's going to be in a longer window than just the day the war ends," he said.
The Consumer Price Index for March showed grocery prices are 1.9% higher than during the same month last year.
Overall, food at home prices fell slightly from February levels. The cost of eggs continued to come down significantly, dropping more than 3% from the previous month. But fruit and vegetable prices were up 1%.
Restaurant prices in March were 3.8% higher than the same month in 2025. The cost of "food away from home" is expected to increase by just under 4% for the year, which Ortega said is driven by the rising cost of labor.
Food supply chains reeling from years of uncertainty
The war in Iran is far from the first world event to send food costs higher.
Ortega said the COVID-19 pandemic in 2020 and Russia's 2022 invasion of Ukraine were also shocks to the system. The multi-year bird flu epidemic has shaken egg and poultry production in recent years. President Donald Trump's tariff policy last year impacted both exports of U.S. crops and imports of packaging supplies needed by American food companies.
After each event, Ortega said consumer prices get pushed higher in response.
"Very rarely do food prices fall, and when they do, it's very short lived, which is why some of these disruptions are really concerning," he said. "They raise the price level for food, and that's one of the reasons why food prices today are, in some cases, more than 30% higher than they were right before the start of COVID."
Because of this recent inflation, food processors and retailers are weighing how much of the new cost increases they can pass on to shoppers.
"A number of food companies that have been reporting earnings have talked about how they're going to try to hold the line on prices, because they know that consumers are feeling the pinch," said Brian Jacobsen, chief economic strategist at Wisconsin-based Annex Wealth Management.
Jacobsen said it can be a gamble for companies to raise prices at the store, especially as consumers have felt the pinch from slower-growing wages. He said there's now more competition between brand names and generic products, and among stores selling groceries.
"They do need to compete for your dollars, and so how you spend it, where you spend it, is going to matter," he said.
Harig said food processors and retailers will try to cut what they pay producers before raising product prices. But that may not work as well as it has in previous years.
"One of the real challenges we're facing here is a lot of this has been passed up the supply chain," he said. "So you sort of squeezed it at that end in order to try to minimize what was passed along to consumers."
Harig said recent surveys done by his association have found that consumers understand how world events are impacting what they pay at the store. And he said companies are hopeful shoppers will still be willing to buy staple items, and even a few "wants," even if they have to pay a little bit more.
This story was produced in partnership with Harvest Public Media, a collaboration of public media newsrooms in the Midwest and Great Plains. It reports on food systems, agriculture and rural issues.
