Your grocery bill could rise even faster next year — here's why

Oil isn't the only commodity in the middle of a massive price surge.

Key agricultural commodities that feed into the food supply chain have also been rallying over the past month.

Industry watchers say it may only be a matter of time before higher input costs hit grocery prices.

Agricultural commodities are typically purchased one to two quarters before they are delivered and processed into finished products.

"That purchasing window creates a price-movement lag," Amanda Rastovic, senior forecast analyst at Expana, told Yahoo Finance, noting food companies gradually pass higher input costs down the supply chain.

"I believe that we will see increases in retail prices by the second quarter of 2027, perhaps slightly earlier or later," Arif Gasilov, partner at Gasilov Group, a sustainability consulting firm, told Yahoo Finance.

Gasilov noted that shipping disruptions in the Middle East can push up costs repeatedly across the supply chain.

"From the farm with the fertilizer, the truck to move it, the warehouses for refrigeration, and so on," he said.

The most recent monthly inflation data showed food prices increased 3.4% in July from the previous year. The food at home index increased 3% on an annualized basis, while food away from home jumped 2.7%.

August was a particularly strong month for agricultural commodities, with energy prices remaining volatile amid US-Iran tensions and extreme rainfall and drought affecting crops.

"Food prices recorded some striking gains amid the continued closure of the Strait of Hormuz and this year's El Niño weather pattern," Deutsche Bank analysts noted on Tuesday.

The firm said that corn ( ZC=F ), which gained more than 23% in August, saw its biggest monthly jump in five years. Sugar ( SB=F ) climbed more than 21%, its largest one-month advance since 2018.

Wheat ( KE=F ) rose 20% over the same period, while soybeans ( ZM=F ) rose 13%, according to AlphaSpace data.

"Grains are running into a very unusual combination of bullish factors," said Mike McGlone, senior commodity strategist for Bloomberg Intelligence, citing geopolitics and too much rain affecting corn crops.

Additionally, more corn and soybeans are being processed into renewable fuels, putting upward pressure on demand. China has also been importing massive quantities of US soybeans to feed its livestock and supply its domestic market.

While current corn and soybean prices are sitting well above production costs, a sudden drop in crude oil prices could soon remove a key driver of this rally.