Before the conflict, farm product prices trended sharply lower peaking at 15.4% YOY in Feb-2025 and bottoming at -7.5% YOY in Jan-2026. As expected farm product prices have started to rebound and hit 4.4% YOY growth in Apr-2026. The pre-conflict deflation was driven by declining oil prices and falling food import prices but both of are now reversing.

Over the six-month forecast period, PPI Farm Products is projected to average +6.2% year-over-year, more than double the trailing twelve-month pace of +2.9%, with oil prices acting as the dominant force behind that acceleration. Oil prices, averaging a 36.5% gain over the lead period, contribute 4.77 percentage points to the forecast — the clearest sign that crude's run-up is now flowing through to farm input costs at full force. Food import prices add a secondary 1.57 percentage points on the strength of a 2.2% average increase, while natural gas contributes a modest 0.07 percentage points and is not a meaningful factor in this cycle. Critically, even these elevated forecast readings understate the true pricing pressure building in the system: PPI Farm Products swung from a peak of +8.5% year-over-year in October 2025 down to -4.7% in January 2026, and that sharp prior deflation is now acting as a statistical cushion that suppresses the year-over-year readings — absent that low comparison base, the forecast figures would appear significantly more alarming to buyers and procurement teams watching headline numbers.

Prior to the conflict, food manufacturing prices followed farm products lower. PPI Food Manufacturing peaked at 4.9% YOY in Oct-2025 and dropped to 0.8% by Feb-2026, driven by falling farm input costs, declining oil prices, softer manufacturing wages, and weak food import prices. But food manufacturing pricesare reversing course as expected but not as significantly as farm products.

Over the next six months, PPI Food Manufacturing is forecast to average plus 3.8% year-over-year, a meaningful step up from the trailing twelve-month average of plus 2.9%, with the trajectory accelerating sharply as the period progresses from plus 1.5% in June to plus 5.0% by September. Manufacturing wages are the dominant force, contributing plus 4.20 percentage points on an average input pace of plus 4.5%, reflecting persistent labor cost pressures embedded throughout the processing and packaging supply chain. Oil prices, averaging plus 32.6% over the forecast window, add a further plus 0.94 percentage points by driving up energy-intensive production costs, transportation, and packaging inputs, while upstream farm commodity prices contribute an additional plus 1.12 percentage points — meaning oil is amplifying pressure at multiple stages of the cost stack simultaneously. Food import prices, averaging minus 0.8%, subtract a modest 0.15 percentage points, and a structural offset of minus 2.29 percentage points moderates the headline reading, but neither is sufficient to neutralize the wage and oil-driven surge. Critically, even these elevated forecasts understate the true pricing pressure now building: PPI Food Manufacturing peaked at plus 4.9% year-over-year in September 2025 before bottoming at just plus 0.9% in January 2026, and that sharp prior deflation has created a depressed comparison base that is artificially cushioning current year-over-year readings — absent that trough, the forecast figures would look considerably more alarming than the headline numbers suggest.

Food inflation was also softening ahead of the conflict peaking at 2.7% YOY in Aug-2025, and hitting 2.0% in Feb-2026. That pre-conflict decline was driven by falling farm and food manufacturing costs working through the supply chain. The other key drivers — PPI Grocery Retail, stable around 3.0% YOY, and retail wages, trending up since Jan-2025 — were providing some upward momentum. The result was a slow, measured decline heading into the conflict. But we are starting to see, the recent higher farm and food manufacturing prices are starting to push food inflation higher.

Over the next six months, CPI Food-at-Home is forecast to average +3.0% year-over-year, a meaningful step up from the +2.4% recorded over the trailing twelve months, with the path running from +2.9% in June to a peak of +3.4% in August before easing back toward the high twos in September and October and recovering to +3.1% by November. The dominant pressure comes from PPI Grocery Retail, where average input inflation of +4.5% contributes +1.81 percentage points to the forecast, reflecting the degree to which upstream cost pressures — rooted in oil-driven farm input and logistics costs — have already worked their way into the retail supply chain. Retail wages, running at +3.4% on average, add a further +1.58 percentage points, and PPI Food Manufacturing at +4.3% contributes an additional +1.43 percentage points, meaning the raw push from costs and labor alone would otherwise place headline FAH inflation considerably higher than what consumers will actually see at the shelf. A structural offset of -1.83 percentage points — the largest single counterforce in the model — captures the same dynamic that has kept FAH inflation remarkably contained through early 2026: slowing retail wage growth relative to prior cycles and measurable margin compression by grocery retailers absorbing cost increases rather than fully passing them through, a pattern that held FAH in a narrow +2.0% to +2.7% range even as upstream indices climbed sharply.

US Grocery Market Units have been trending down YOY since early 2025 and bottomed out at -3.0% just ahead of the conflict.The last 12 months were down -0.5%, but the first half of the year was much stronger than the last half. The higher CPI FAH number in Apr-2026 helped to keep unit growth down about 1.4% YOY.

Over the six months ending November 2026, US grocery unit volume is forecast to average -2.1% year-over-year, a meaningful deterioration from the trailing twelve-month average of -0.4%, and a sharp reversal from the roughly 2% growth seen in late 2024 and early 2025. The dominant force driving that decline is food-at-home inflation, which is projected to average 3.0% over the forecast window and alone subtracts 2.43 percentage points from unit growth — as higher shelf prices compress purchase volumes, consumers either trade down in pack size or skip categories entirely. SNAP benefit erosion, averaging -13.3%, adds a further -0.19 point drag, as lower transfer payments reduce purchasing power among the program's roughly 42 million participants and pull down unit counts in the categories they over-index. Partially offsetting these headwinds, pharmacy revenue growth of 2.6% contributes +0.19 points — reflecting the pull-through traffic benefit that pharmacy visits generate for general grocery aisles — while home price appreciation of 0.5% adds a modest +0.17 points by supporting household wealth and discretionary spending at the margin, though neither offset comes close to neutralizing the inflation-driven volume loss.

Sales were solid in 2024 and the first eight months of 2025, but the last six months have seen YOY sales drop precipitously. The long-run trend for grocery is about 3% YOY with 2% growth typically coming from CPI FAH and the other 1% from unit growth. CPI FAH reversed course in Apr-2026 which helped Sales growth tick up to a meager 1.5% YOY in April.

The six-month forecast for US grocery sales averages +0.9% year-over-year, a meaningful step down from the trailing twelve-month average of +2.0%, reflecting a market that has moved well past its growth peak of +3.8% in late 2024 and early 2025. The dominant driver sustaining positive territory is CPI food-at-home inflation, contributing +3.00 percentage points to the forecast as food prices remain elevated — a figure that, on its own, would suggest a healthy sales environment. Working directly against that, weakening unit volumes subtract 2.05 percentage points, meaning consumers are buying less even as they spend more, a classic sign of price-driven revenue rather than demand-driven growth. The net result is a sales trajectory that decelerates from +1.3% in June 2026 down to +0.6% by October before a modest uptick to +0.8% in November, leaving grocery executives in a difficult position where inflation is effectively doing the heavy lifting while underlying consumer demand continues to erode.