JPMorgan warns grocery prices may surge as USDA forecasts up to 12.3% jump

JPMorgan dropped a report on July 24 warning that a brewing super El Niño, combined with energy prices inflated by the ongoing Iran conflict, could add 1.3 to 1.5 percentage points to global food inflation at its peak. That would push annualized food inflation to roughly 5% during the first half of 2027.

The timing is uncomfortable. The USDA’s Economic Research Service released its July 2026 Food Price Outlook around the same period, projecting a baseline 2.9% increase in food-at-home prices for 2027. But the uncertainty range on that number stretches from negative 5.6% all the way up to 12.3%.

That upper bound is the figure making the rounds, and for good reason. A 12.3% grocery price surge would represent one of the sharpest single-year increases in recent memory, hitting a category of spending that consumers literally cannot avoid.

What the numbers actually say

The USDA’s baseline forecast is relatively tame. For 2026, food-at-home prices are projected to climb 2.7%, within an interval of 1.6% to 3.9%. As of June 2026, the food-at-home CPI was already tracking at 2.7% year-over-year, with the all-food CPI running at 3.0%.

JPMorgan thinks they might. The bank’s report estimates that a super El Niño, layered on top of elevated energy costs driven by geopolitical friction, could add 0.3 percentage points to global headline inflation in 2027.

Certain food categories are already feeling the heat. Beef and veal prices are projected to jump 10.7% in 2026, with the USDA’s confidence interval stretching from 7.2% to 14.6%.

The distinction worth drawing: the USDA’s 12.3% upper-bound figure represents a worst-case scenario across all grocery categories, not a central forecast. JPMorgan’s analysis of climate and energy risks provides a plausible mechanism for how prices could drift toward that ceiling, but neither institution is predicting 12.3% as a baseline outcome.

Why El Niño and geopolitics matter for your grocery bill

Super El Niño events disrupt agricultural yields across multiple continents simultaneously. Droughts in Southeast Asia and Australia collide with flooding in South America, creating supply bottlenecks that ripple through global commodity markets.

JPMorgan’s report highlights that emerging market economies face disproportionate risk from this convergence. Countries like India, Indonesia, Brazil, and Colombia spend a larger share of household income on food, making them especially vulnerable to price shocks.

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