USDA Expects Slower Growth In 2026, While Easing Global Commodity Pressures & Softer Inflation Trends Could Open The Door To “Grocery Deflation” In Q2, If Key Conditions Hold

Sunday, December 21, 2025, 8:30 A.M. ET. 5 Minute Read, By Haylee Ficuciello, Economy & Finance Editor: Englebrook Independent News,

WASHINGTON, DC.- After five years of household budgets being squeezed at the checkout line, a growing set of indicators suggests U.S. grocery inflation may cool further in 2026, and, under the right conditions, consumers could begin seeing actual price declines on some staple categories beginning in the second quarter of 2026, with the broader trend potentially stabilizing by the fourth quarter of 2026 and carrying into 2027.

     But here’s the critical distinction: most official U.S. forecasts do not publish quarter-by-quarter grocery price projections. What exists, particularly from federal statistical agencies and agriculture economists, are annual forecasts, inflation projections, and commodity-market outlooks that can be used to assess whether a Q2 2026 easing is plausible, and what would need to happen for a sustained downshift through late 2026

What The Most Authoritative U.S. Food Forecast Says About 2026;

     The U.S. Department of Agriculture’s Economic Research Service (USDA ERS) publishes a widely cited Food Price Outlook, built primarily using Bureau of Labor Statistics (BLS) food Consumer Price Index data and related producer-price indicators. As of its latest update, USDA ERS projects that in 2026:

• Food-at-home (grocery store) prices are predicted to rise 2.3%, but with a wide prediction interval that includes declines (–4.3% to 9.6%).
• All food prices are predicted to rise 2.7% (prediction interval –1.8% to 7.5%).
• Food-away-from-home (restaurants) is projected to be higher than groceries at 3.3% (prediction interval 0.7% to 5.8%).

     That forecast does not guarantee grocery price declines in Q2 2026, but the key takeaway is this: USDA’s uncertainty band explicitly allows for grocery deflation in 2026, even while the midpoint forecast remains modestly positive.

Where Grocery Inflation Stands Right Now;

     The most recent BLS Consumer Price Index report shows grocery inflation has already cooled significantly from peak levels:

• Over the 12 months ending November 2025, the food-at-home index rose 1.9%.
• Over the same period, food overall rose 2.6%.

     In practical terms, the inflation problem at the grocery store has not disappeared, but it has shifted from rapid escalation to slower increases, a baseline that makes intermittent monthly declines more realistic if upstream cost pressures continue to ease.

Why Q2 2026 Is Emerging As A Plausible Turning Point;

     Because the U.S. does not publish an official quarterly grocery-price forecast, the case for Q2 2026 rests on how several well-documented cost drivers typically flow into retail pricing with a delay.

Global Food And Commodity Pressures Are Easing:

     International benchmarks matter because many U.S. food categories are influenced by global markets through feed, ingredients, and trade.

• The FAO Food Price Index recorded its third consecutive monthly decline in November 2025, remaining well below its 2022 peak.
• The World Bank projects global commodity prices falling to a six-year low in 2026, with prices forecast to decline 7% in 2026 after an expected 7% drop in 2025.
• Agricultural and food-related commodities are broadly projected to remain stable or trend lower into 2026.

     Historically, when global commodity pressures ease and remain contained, U.S. retail food prices often respond after a lag, aligning with a spring-to-early-summer window.

Energy And Freight Costs Could Deliver A Second Wave Of Relief:

     Food prices reflect far more than ingredients. Processing, refrigeration, packaging, and transportation all play a major role.

     Major financial-sector forecasts cited by Reuters project oil prices declining in 2026, a development that, if sustained, could reduce logistics and distribution costs across the food supply chain.

     While lower fuel prices do not automatically guarantee cheaper groceries, they tend to reduce upward pressure and can encourage retailers to increase promotions or implement targeted price rollbacks in competitive categories.

Broader Inflation Trends Point Toward A Cooler 2026;

     Food inflation often diverges from headline inflation, but broader economic conditions still matter.

• Federal Reserve economic projections continue to show inflation gradually moving closer to long-run targets over time.
• Congressional Budget Office forecasts similarly anticipate moderating inflation, while cautioning that uncertainty remains elevated.

     A cooler inflation environment reduces the ability of suppliers and retailers to push through aggressive price increases.

What Early Price Declines Would Likely Look Like;

     If grocery prices begin easing in Q2 2026, consumers should not expect uniform price cuts across the board. More likely early signals include:

• More frequent month-to-month declines in the BLS food-at-home index.
• Category-specific deflation, particularly in items tied closely to commodities and feed costs.
• Heavier promotions and private-label substitution effectively lower what consumers pay, even before list prices decline.

Why Stabilization By Q4 2026 Is Possible, But Not Guaranteed;

     A stabilization trend into late 2026 and 2027 aligns with USDA’s expectation that food price growth in 2026 will remain below long-term historical averages, and with global forecasts that anticipate easing cost pressures.

     However, the wide forecast ranges themselves underscore lingering risk. Factors that could reverse progress include:

• Severe weather events.
• Livestock disease outbreaks.
• Trade or geopolitical disruptions.
• Energy-price spikes affecting processing and transportation.

The Bottom Line For Families Planning Ahead;

     Based on verified federal and international data available today:

• Grocery inflation in 2026 is expected to be significantly calmer than in recent years.
• USDA’s forecast explicitly allows for possible price declines, even if they are not guaranteed.
• A Q2 2026 easing is plausible, but consumers should expect gradual relief rather than an overnight reset.

     If relief arrives, it is most likely to come first through stabilization, selective category declines, and sustained month-to-month moderation, rather than dramatic across-the-board price cuts.

Editor’s Note:

This report is based exclusively on an analysis by Haylee Ficuciello of the most current publicly available data from the USDA Economic Research Service Food Price Outlook, the U.S. Bureau of Labor Statistics Consumer Price Index, and internationally recognized indicators from the World Bank and the Food and Agriculture Organization of the United Nations. Because official U.S. agencies publish food-price forecasts primarily on an annual basis, any discussion of potential timing for Q2 2026 reflects scenario analysis grounded in documented cost drivers and historical lag patterns, not a guaranteed outcome.