Investors fear food prices may trigger next inflation spike for bond markets

Global bond markets are recalibrating around a growing consensus that food prices, not energy, represent the most underpriced inflation risk heading into 2027. The UN Food Commodities Index has climbed to its highest level since late 2022, and JPMorgan Chase economists project global food inflation will hit 5% in the first half of 2027, up from 2.8% during the same period in 2026. A perfect storm on the farm A predicted intense El Niño weather pattern threatens crop yields across multiple continents. Fertilizer supplies remain constrained. Shipping disruptions continue to complicate global trade routes. And Europe’s brutally hot summer in 2026 has already damaged harvests in ways that will echo through supply chains for months. Barclays economists are forecasting potential crop yield impacts in Europe as early as autumn 2026, with broader effects spreading into 2027. On the corporate side, Campbell’s, one of the largest packaged food companies in the US, is planning price increases of 4% to 5% across roughly 60% of its product lineup. Meanwhile, elevated diesel prices in the US have surpassed $6 per gallon, adding transportation costs on top of the production pressures. Bond market...