Scottish economic insights: September 2026

Box 2: Food price inflation in depth

Rising food prices have been a prominent feature of the recent inflationary period. Global shocks to commodity markets, energy prices and supply chains contributed to a substantial increase in UK food prices, which remain significantly above pre-pandemic levels despite a marked easing in annual inflation rates since 2023. Given the importance of food within household expenditure and its visibility to consumers, developments in food prices remain an important consideration for inflation and living standards. This box examines trends in global food commodity markets, changes in UK food prices relative to earnings, and the outlook for food inflation.

Global food commodity prices have fallen from their peak, but risks remain

Global food commodity prices had moderated after increasing sharply between 2020 and 2022, driven by pandemic-related supply chain disruptions, rising energy costs and Russia's invasion of Ukraine. However, the index remains around 28% above its pre-pandemic level, and while prices for some commodities have fallen from their peaks, others, particularly vegetable oils, remain elevated.^[29]

Several factors are contributing to food price pressures. The conflict in the Middle East have increased prices in global energy and commodity markets, contributing to higher transportation, logistics and fertiliser costs. At the same time, adverse weather conditions across a number of food-producing regions, including droughts in parts of Europe and the potential effects of El Niño, have had an impact on agricultural output. Reflecting these pressures, international prices for several key agricultural commodities have risen sharply, including wheat (45%), cocoa (over 100%), rice (60%), sugar (27%) and coffee (22%), while domestically UK-grown produce prices have increased by almost 10% over the past year.^[30]

Food prices have outpaced earnings growth since 2021

The increase in food prices has exceeded earnings growth in Scotland over the last five years. Between January 2021 and July 2026, food prices rose by around 39%, compared with growth of approximately 33% in mean earnings in Scotland.^[31],[32]

Much of this divergence emerged during 2022 and 2023, reflecting the pass-through of higher global commodity prices, energy costs and other supply-side pressures to domestic food prices. As a result, food prices rose more rapidly than earnings, creating a gap that has persisted over time.

While food price inflation has moderated considerably since 2023, food prices have continued to increase, albeit at a slower rate. As a result, the sharp increase in food prices experienced during the recent inflationary episode has largely been maintained, with cumulative food price growth continuing to exceed earnings growth.

Forecasts suggest food inflation will remain above historical norms

Food price inflation has surprised to the downside following the rise in energy prices at the beginning of the year, falling to 1.2% in July. However, whilst it is now expected to remain below the peaks observed following the shocks in 2022, it is still expected to rise in the coming months, as higher energy prices, rising agricultural input costs, supply chain disruption, and weather-related impacts increasingly weigh on agricultural production.

The Bank of England projects food price inflation to rise to around 3.5% by the end of 2026, while intelligence from its Agents network suggests food inflation could reach around 4% to 5% by year-end.^[33] Industry forecasts are similar, with the Food and Drink Federation expecting food inflation to reach 3.9% by December 2026 and peak at 6.4% in mid-2027, while the Institute of Grocery Distribution forecasts food inflation to average between 3.7% and 4.7% during 2026 and peak at around 5.5%.^[34] These rising prices will contribute to the pressures which households are facing, particularly lower income households where food is relatively more important expenditure, especially with energy prices also forecast to increase in October and January.

End of Box 2