Geopolitical conflicts and climate pressures are driving global food prices up by an estimated 11.6% in 2026, with rising energy and fertilizer costs impacting food production across farming, processing, and distribution. Emerging markets face greater inflation pressure since food represents up to 40% of consumer spending compared to 10% in advanced economies, forcing consumers to cut discretionary purchases and shift toward cheaper brands and staples.
- Price Forecast: Global food prices are expected to increase by 11.6% in 2026 and 4.8% in 2027 due to geopolitical and climate pressures.
- Energy Impact: Closure of the Strait of Hormuz has raised energy and fertilizer prices, directly affecting every stage of food production from planting to transport.
- Regional Vulnerability: In emerging markets like the Philippines, Indonesia, and India, food accounts for up to 40% of consumer spending versus 10% in advanced economies, amplifying inflation effects.
- Consumer Behavior: Rising prices are reinforcing pricing fatigue, with consumers turning to cheaper brands, reducing discretionary purchases, and prioritizing essential groceries.
- Business Risk: Smaller, less diversified food producers and energy-intensive sectors like dairy and meat processing face higher credit risk as input cost increases exceed achievable price increases.
From farming margins to supermarket shelves, the impact of the Gulf conflict can be felt throughout the food production chain. The closure of the Strait of Hormuz has led to rising energy and fertilizer prices, directly impacting global food production and prices. Higher fertilizer prices can already be seen in inflated food prices. In addition, rising energy costs are being felt in every step of food production, from planting and harvesting to processing, storage, and transport. This all has a direct impact on food producers, processors, retailers, and consumers alike, according to data released by Atradius.
The combination of geopolitical and climate pressures is likely to constrain production in several key agricultural regions, increase global price volatility, and push food prices higher worldwide. Global food prices are forecast to increase by 11.6% in 2026 and by 4.8% in 2027.
“This is accelerating a trend we were already seeing. Even before the current price spikes, U.S. and European consumers have been more price-sensitive on food items. This reflects ‘pricing fatigue,’ as prices remain structurally higher than pre-pandemic levels, despite food prices coming down recently,” says Sharon Benfer, Atradius senior underwriter.
Emerging markets are expected to be more affected than advanced economies, given their higher weight in consumption baskets. In economies such as the Philippines, Indonesia, and India, food accounts for up to 40% of the consumer price index vs. around 10% in advanced economies, amplifying the effect on headline inflation.
Key takeaways:
· Rising energy and food prices in the United States are reinforcing consumer price sensitivity.
· In Southeast Asia, consumers are demonstrating similar behavior, turning to cheaper brands, reducing their discretionary purchases and prioritizing essential groceries.
· As food prices increase, those consumers cannot reduce consumption significantly. There is a reallocation of consumption toward necessities, which prioritize staples over discretionary consumption.
· Food producers and processors are facing higher input costs, in particular for energy, commodities, packaging, and transport.
· In Europe, higher energy prices have a particularly negative impact on energy-intensive food production, especially those that use energy for cooling, heating, and processing.
· Nany European food producers are focusing on cost control, portfolio optimization, efficiency improvements, and selective price increases in order to protect profitability. However, the gap between input cost increases and achievable pricing persists.
· Credit risk is higher for smaller or less diversified businesses with weaker bargaining power and for energy-intensive subsectors relying heavily on heating or cooling, transport, and feed costs, such as dairy and meat processing.
· In Southeast Asia, producers are also struggling to pass higher costs on to retailers because the grocery retail market is heavily consolidated. Expect more U.S. businesses to pass on price increases to consumers.
· Larger U.S. retailers may be better positioned to withstand margin pressure.
· In Southeast Asia, independent and small-scale food retailers are more vulnerable due to limited bargaining power against suppliers and restrained capability to compete effectively with large retailers on pricing or promotions.
· In Europe, vulnerability is highest where cost inflation meets weak pricing flexibility. Leveraged small retailers will suffer more in contrast to larger, diversified producers and major retailers or discounters with greater scale, pricing power, and cost absorption capacity.
· In order to strengthen their resilience, many retailers are expanding private label ranges, optimizing sourcing strategies, and investing in efficiency measures such as automation and AI to protect margins. Consolidation and clear differentiation are becoming essential.
· Many premium food retailers face volume pressure where price gaps vs. private label are widening, while producers often operate with higher cost structures, increasing exposure to input cost inflation and limiting pricing flexibility.
· In the United States, expect an acceleration of M&A activities due to the difficult market conditions. Larger companies will focus on certain core categories and divest themselves of those categories that are not value added.
· M&A activity in the European food sector is recovering in 2026 after a weaker 2025.
