UK Food Inflation Set for Rise Despite Calming Grain Market Update

Despite a reassuring update on global grain markets, UK food inflation is expected to rise towards 5% by early 2027. The US Department of Agriculture's September World Agricultural Supply and Demand Estimates (WASDE) report showed higher wheat supplies and fuller stores worldwide.

The WASDE report pointed to an increase in global wheat supplies by 3.5 million tonnes, with ending stocks raised by 3 million tonnes. Much of this extra output came from Australia, where local farm agency ABARES lifted its forecast by 3 million tonnes due to favourable growing conditions in South Australia and Victoria.

Shore Capital analysts Clive Black and Akhil Patel described the update as a calming influence on grain markets, but still expect British food inflation to rise. They pointed to Brent crude oil prices sitting at $107 a barrel, which lifts distribution and packaging costs, alongside fertiliser prices 15% above pre-conflict levels.

UK dairy prices are expected to firm after a poor summer for pasture, while a wave of sow culls across Europe could push pig meat costs higher in 2027. Shore Capital also renewed their concern over UK food security, estimating that Britain is less than 60% self-sufficient in food, and probably below 50% once Northern Ireland is excluded.