What the June CPI Release Could Tell Us about Food Prices

The June CPI may show welcome relief from falling gas prices, but food inflation is likely to remain uneven in the coming months as energy, weather, tariffs and supply-chain pressures continue working through the system.

By Andy Harig, Vice President, Tax, Trade, Sustainability and Policy Development, FMI

“It’s tough to make predictions, especially about the future.” There is debate over whether Yogi Berra actually coined this phrase, but he undoubtedly moved it into popular usage. Its wisdom is as true today as when he was managing the New York Mets in the 1960s and 1970s. Despite this warning, I’m going to take a flier and talk about where we are headed on food prices. When the June Consumer Price Index (CPI) is released next week, the headline number seems poised to tell a story consumers already know well: inflation has cooled from its worst levels, but prices remain stubbornly high in the places people feel most − at the gas pump and in the grocery aisle.

The June CPI report will arrive at an important moment. The conflict in Iran was briefly paused but now appears to be back in full force; the Strait of Hormuz has reopened and oil shipments are moving again but for how long nobody seems to know; and gas prices fell from their spring highs but threaten to surge if oil prices start rising again. Energy is embedded in nearly every step of the food supply chain − from farm equipment and fertilizer production to refrigerated trucks, warehouses, packaging materials and store operations − so uncertainty around where prices are headed also means uncertainty around food prices.

Even if oil prices stay low, relief may not show up all at once. Energy prices can move quickly; food prices almost never do. When diesel, jet fuel or natural gas costs spike, companies often see immediate increases through fuel surcharges, freight contracts and higher input costs. Passing those costs to consumers, however, takes time − and many food retailers and suppliers are reluctant to do so after several years of elevated inflation. Shoppers are already stretched, especially lower-income households, and there is less room than before to simply raise prices without also leading to changes in shopping behavior.

That is why the June CPI numbers should be read with nuance and the awareness that one or two months of data do not a trend make. If headline inflation improves because gasoline was falling, that will be positive. Lower fuel costs can ease pressure across the economy and eventually reduce transportation costs for food companies. Yet the food category may still reflect earlier energy shocks that have not fully worked through the system. Food inflation is not a one-to-one pass-through from oil prices. Some costs are absorbed by manufacturers, wholesalers and retailers; others are spread across contracts or delayed until the next purchasing cycle.

Recent data underscore that mixed picture. In May, food prices were 3.1% higher than a year earlier, while grocery prices were up 2.7%. USDA’s June Food Price Outlook projected all food prices to rise 3.2% in 2026, with food-at-home prices up 2.8%. Those numbers are far below the peak inflation consumers faced in 2022, but they are still meaningful because groceries are purchased frequently and remembered clearly. A shopper may not buy a car every month, but they know what milk, beef, coffee or cereal cost last week.

Several categories remain especially sensitive. Beef prices are unlikely to come down quickly because cattle herds take years − not months − to rebuild, and drought, feed costs, labor, weather disruptions, and the current outbreak of New World Screwworm can prolong tight supplies. Poultry and pork can respond faster, but they may face substitution pressure if consumers trade down from higher-priced beef. Beverages and packaged foods are also worth watching because packaging relies heavily on petroleum-based plastics, aluminum, steel, and paper – all of which have also faced tariff and trade pressures.

Weather is another major wildcard. Drought in the Southeast, snowpack conditions in the West, wildfire risk and the possibility of stronger El Niño-related heat or drought conditions could all impact production as the year progresses.

Fertilizer is also a longer-tail issue. Higher fertilizer costs may be painful for farmers immediately, but the impact on consumers can take months to appear − first through harvest costs, and later through feed costs for animal proteins.

The June CPI release will not answer every question, but it will send some important signals. A softer headline number driven by cheaper gasoline would be encouraging, especially if the recent flair-up in hostilities proves to be a temporary one. The more important test will be whether food inflation shows signs of stabilizing without masking pressure in key categories like animal proteins, beverages, and produce.

Trying to predict food price inflation for any given month feels like a sucker’s bet – food and energy are excluded from core inflation calculations precisely because they are so volatile.  Whether the recent flare up in hostilities proves to be a bump in the road or the beginning of a longer period of tensions, food prices still face challenges associated with fuel, weather, labor, tariffs, packaging and farm-level costs. For shoppers, that means inflation relief may come gradually − and unevenly − rather than in one decisive drop.