USDA Lowers 2026 Food Inflation Forecast, but Prices Keep Climbing
Grocery inflation eases, but restaurant costs and food inflation persist
USDA modestly lowered its 2026 food inflation outlook, signaling some easing in grocery price pressures, but consumers are still expected to face food costs that remain above long-term historical norms. The latest Food Price Outlook projects all food prices to rise 3.2% in 2026, down from the agency’s 3.4% forecast in May. Grocery, or food-at-home, prices are now expected to increase 2.8%, compared with the previous forecast of 3.2%. In contrast, USDA slightly raised its outlook for food-away-from-home prices, with restaurant costs now projected to climb 3.6%, up from 3.5% a month ago.
Even with those downward revisions, inflation across all three major categories remains above their 20-year averages. USDA expects overall food inflation to exceed its long-term average of 3.0%, grocery prices to outpace their 2.6% historical average, and restaurant prices to remain slightly above their 3.5% trend. That suggests consumers are moving away from the period of exceptionally high food inflation experienced in recent years, but not returning to the relatively stable pricing environment that prevailed before the pandemic.
The most significant revision came in the beef outlook. USDA now expects beef and veal prices to rise 7.5% in 2026, sharply below the 12.1% increase projected in May. The adjustment follows a 1.3% decline in beef prices from April to May, although prices remained 12.9% above year-earlier levels. USDA cautioned that the moderation should not be interpreted as a fundamental shift in market conditions. The U.S. cattle herd remains the smallest in roughly 75 years, and consumer demand has remained resilient despite historically high retail prices. Unless herd rebuilding accelerates, beef is likely to remain one of the highest-inflation food categories.
Other meat forecasts moved in the opposite direction. USDA raised its pork price outlook to a 1.9% increase from 1.5% previously after retail pork prices strengthened this spring. Poultry prices are also now expected to increase 1.9%, a substantial revision from the 0.5% gain projected in May, reflecting firmer consumer demand and production costs.
Egg prices continue to represent the largest source of relief for consumers. USDA now projects retail egg prices will decline 30.4% in 2026, slightly more than the 29.8% decrease forecast last month. The outlook reflects continued recovery of the nation’s egg-laying flock following the highly pathogenic avian influenza outbreaks that drove prices sharply higher over the past several years. USDA noted that HPAI detections during the first quarter of 2026 were well below year-earlier levels, while larger supplies of replacement pullets have accelerated flock rebuilding. Combined, those factors are allowing production to recover and retail prices to normalize after several years of extraordinary volatility.
USDA also became more bearish on dairy prices, now forecasting a 0.9% decline compared with the 0.1% decrease expected in May. Fats and oils are projected to fall 4.5%, reflecting continued easing in vegetable oil markets and improved supplies.
Seven food categories are expected to post price increases exceeding their long-term averages, including beef and veal, fish and seafood, fresh fruits, fresh vegetables, processed fruits and vegetables, sugar and sweets, and nonalcoholic beverages. Pork, poultry, cereal and bakery products, other meats, and other foods are still expected to rise, but at rates below their historical averages. Eggs, dairy products, and fats and oils remain the only major categories expected to post outright price declines during 2026.
The monthly data underscore that food inflation remains uneven. Between April and May, prices increased 1.3% for both sugar and sweets and poultry, rose 1.2% for fish and seafood, and climbed 1.0% for pork. Offsetting those gains were declines of 2.7% for other meats, 2.1% for fats and oils, 1.5% for eggs, and 1.3% for beef and veal.
The broader inflation picture also remains mixed. Grocery inflation has moderated considerably from the sharp increases seen earlier this decade, but consumers are still paying substantially more than they were only a few years ago. Grocery prices increased 5.0% in 2023, 1.2% in 2024, and 2.3% in 2025 before the projected 2.8% gain in 2026. Those increases are cumulative, leaving household food budgets permanently higher even as annual inflation slows.
Restaurant prices remain the area of greatest concern. Food-away-from-home inflation is being driven less by commodity costs than by persistent increases in labor, rent, insurance, utilities, and other operating expenses. Even if commodity markets stabilize further, those structural costs could keep menu prices rising faster than grocery prices for the foreseeable future.
Looking ahead, analysts will be watching USDA’s July Food Price Outlook, which will include the agency’s first projections for 2027 food inflation. Last year’s initial 2026 forecast ultimately understated price pressures by a meaningful margin, partly because missing Consumer Price Index data during the October-December period reduced the amount of information available to forecasters. Assuming a normal flow of inflation data this year, the July outlook should provide a clearer early indication of whether food inflation is continuing to moderate or settling into a period of persistently above-average price growth.
