UK food inflation to continue to fall in 2026, says Sainsbury’s boss
The boss of supermarket chain Sainsbury’s has predicted that food inflation will continue to fall in 2026.
Following this morning’s Christmas trading update, Sainsbury’s CEO Simon Roberts told reporters:
“We’ve seen food inflation come down and when you think about the outlook for the year ahead we’d expect that to continue,”
Roberts said that commodity prices were likely to be more stable in 2026 – speaking shortly before the UN reported that global food prices had dropped again in December (see previous post).
Key events
EU backs Mercosur trade deal despite farmer protests
Lisa O’Carroll
European nations have backed the biggest ever free trade agreement with a group of South American countries, ending 25 years of negotiations but risking further tensions with farmers around the bloc.
France, Poland, Austria, Ireland and Hungary opposed the deal in the face of protests from the agricultural sector, but Italy dropped its opposition allowing the landmark deal to be adopted under the majority voting system.
The deal with Brazil, Argentina, Paraquay and Uruquary, must still get the approval of the European Parliament but bar any major U-turns by member states, it could be signed off as early as next week by European Commission president Ursula von der Leyen.
The European Commission which concluded negotiations a year ago had hoped to get the deal over the line at the European Council summit but it was pulled from the agenda at the last minute after opposition by France and Italy, two of the bloc’s biggest agricultural producers.
On Thursday night French president Emmanuel Macron announced it would vote against the deal after farmers rolled into Paris on tractors in the latest protests against the pact which they fear will flood the bloc with cheap and substandard meat.
A senior European Commission official described Ireland’s decision to also vote against the deal as “disappointing” claiming the country’s concerns had been address.
Belgian abstained from the vote, reflecting differences in the federal government.
Supporters of the deal say it will help the EU diversify and compensate for the new trade barriers erected by Donald Trump and lower tariffs on the equivalent of just 1.5% of beef produced in the EU.
It will see import duties phased out on 91% of EU goods and allow freer access to critical raw materials like lithium needed for batteries in the European car industry.
The German federation of industries has welcomed the Mercosur deal saying it is an important day for the Germany and European economies showing that the “EU can be a relevant geostrategic actor”.
We have some rather mixed economic data from Europe’s largest economy this morning.
German exports unexpectedly fell by 2.5% in November, with shipments to the US, and other European Union countries, both declining.
But factory output has risen unexpectedly in November, by 0.8%, while factory orders surged by 5.6% in the month.
Holger Schmieding, chief economist at Berenberg, says this shows the German government’s stimulus package is starting to work, lifting domestic demand, explaining:
Of course, monthly data are volatile. We thus have to take the November surprise with a 5.6% mom surge in German factory orders and a 0.8% gain in industrial output with a pinch of salt. Still, the three-month moving averages tell a story: German industry seems to be beyond the worst.
I mentioned earlier that coal could be a stumbling block in the Rio-Glencore merger talks, but apparently it’s not!
Bloomberg are reporting that Rio Tinto is open to retaining Glencore’s coal business if merger talks between the two companies are successful.
That would be a return to coal for Rio, which sold its last Australian coal mine in 2018.
Bloomberg say:
Rio’s willingness to return to coal echoes a wider reversal in the business and political climate, as US President Donald Trump champions a backlash against green policies.
Rio and Glencore previously held discussions about a combination in 2024, but the talks fell apart after they failed to agree on issues, including valuation. Since then then copper has rallied to a record high and Glencore has sought to position itself as a company with huge copper growth potential. Rio gets most of its earnings from iron ore.
Glencore’s coal business is regularly its biggest profit driver, although the unit has underperformed over the past year as coal prices tumbled.
Falling food inflation could encourage central banks to keep cutting interest rates.
UK government bonds have rallied this week, partly due to predictions that weaker inflation could lead to more Bank of England interest rate cuts.
According to Bloomberg data, benchmark 10-year UK gilts are on track for the biggest weekly gain since October; as bond prices rise, the yield (or rate of return) on the debt falls.
UK food inflation to continue to fall in 2026, says Sainsbury’s boss
The boss of supermarket chain Sainsbury’s has predicted that food inflation will continue to fall in 2026.
Following this morning’s Christmas trading update, Sainsbury’s CEO Simon Roberts told reporters:
“We’ve seen food inflation come down and when you think about the outlook for the year ahead we’d expect that to continue,”
Roberts said that commodity prices were likely to be more stable in 2026 – speaking shortly before the UN reported that global food prices had dropped again in December (see previous post).
World food prices fall again in Decemeber
Global food prices have fallen again, offering some hope to families around the world struggling with the cost of living.
The United Nations’ monthly Food Price Index shows that average price fell by 0.8% month-on-month in December, pulled down by dairy products, meat and vegetable oils which offset increases in cereals and sugar.
Following falls in recent months, the index is now 2.3% below its level one year ago, and 22.4% below the peak reached in March 2022, after Russia invaded Ukraine.
The report shows that dairy prices fell by 4.4% in December, with butter prices fall sharply, driven by seasonally higher cream availability in Europe, while ehole milk powder (WMP) prices also declined, reflecting peak seasonal milk output in Oceania.
Meat prices fell 1.3% in the month, but were still 3.4% above their level a year ago.
The UN says prices declined across all meat categories, with those of bovine and poultry meats falling the most, adding:
Lower world bovine meat prices reflected weaker quotations in Australia, where seasonally dry conditions prompted herd destocking, increasing cattle availability for slaughter and exerting downward pressure on prices. International poultry meat quotations declined, as ample exportable supplies outweighed global import demand. Ovine meat prices eased marginally amid larger seasonal supplies entering the market, despite continued solid global import demand. Pig meat prices decreased slightly, led by weaker quotations in the European Union amid subdued global demand.
Vegetable oil prices fell 0.2% in December to a six-month low, due to lower world prices of soy, rapeseed and sunflower oils.
Global soyoil prices declined on ample export supplies from the Americas, while larger rapeseed outputs in Australia and Canada exerted downward pressure on rapeseed markets, the UN says, while there was “sluggish” demand for sunflower oil.
But, cereal prices rose by 1.7%, amid renewed concerns over Black Sea exports as the Russia-Ukraine war continued.
Sugar was pricier too, with prices up 2.4%, due to a sharp drop in sugar production in Brazil’s key southern growing regions.
The copper price is rising again today, as both base metals and precious metals remain in demand.
The benchmark three-month copper on the London Metal Exchange has risen by 1.20% to $12,873 a ton this morning, which puts it on track for a gain of more than 3%.
Copper is a key factor in the Rio Tinto-Glencore talks. In December, Gary Nagle, Glencore’s chief executive, said the company’s aim was to become “the biggest copper producer in the world”. It is currently the world’s sixth-largest copper producer and the largest listed coal producer.
Copper, widely used in industry, has been rising in price amid concerns about tightening supplies, and speculation that Donald Trump could impose a tariff on imports of the metal.
FTSE 100 rises as ‘the mother of all mining deals’ returns
News of the potential mega-mining deal involving Rio Tinto and Glencore is sending ripples though the London stock market.
UPDATED: Shares in Glencore, which would probably be acquired if a deal goes though, jumped by more than 6% in early trading, and are now up 8%.
Rio Tinto, the likely buyer if a deal is reached, are down 2.6%
Other mining stocks are also up this morning; copper producer Antofagasta has gained 1.5% while Anglo American (involved in its own takeover, of Canada’s Teck) has gained 0.5%.
So overall, the FTSE 100 share index is up 0.25% or 24 points at 10,069 points.
Derren Nathan, head of equity research at Hargreaves Lansdown, says:
“Last year’s theme of consolidation in the natural resources sector has shown no sign of let up in the early part of 2026. In the same week we’ve seen Chevron make a swoop for Lukoil’s non-Russian fossil fuel assets, Rio Tinto and Glencore have confirmed that the mother of all mining deals could be back on the table.
Details are thin on the ground, but a deal could see Rio scoop up some or all of Glencore’s assets. A full combination would create a global leader in multiple industrial metals including iron ore and transition metals such as copper, cobalt and lithium. But M&A isn’t an automatic path to extracting value for investors, with Rio’s Australian shares down 6% and Glencore ending Thursday in negative territory. Under the UK’s takeover code, the management teams now have until 5th February to outline a compelling case for both sets of shareholders.
The diverse asset base and likely synergies have the potential to provide further protection against commodity price fluctuations, but just how Glencore’s coal and trading arms fit in with Rio’s business model, and push for improved sustainability credentials, are key questions to answer.”
On Sainsbury’s results, retail analyst Nick Bubb says:
Sainsbury’s core Grocery business looks to have done better than Tesco at Christmas, but Argos let the side down and looks to have prevented the group from upgrading its full-year profit guidance…
Indeed, Sainsbury’s continue to expect to deliver an underlying operating profit of more than £1bn, after upgrading its guidance in November.
There is one upgrade to guidance, though; the company now predicts free cash flow of more than £550m (previous guidance: more than £500 million), which it says reflects “strong working capital performance”.
Sainsbury’s shares fall after Christmas trading report
UK supermarket chain J Sainsbury appears to have disappointed the City with its Christmas trading performance.
Shares in Sainsbury’s have dropped by almost 4% at the start of trading in London, after the company reported weaker-than-expected sales growth over the crucial festive period.
Like-for-like sales excluding fuel across the company, which includes Sainsbury’s supermarkets and the Argos catalogue chain, rose 3.4% in the last quarter (to 3 January), below analyst forecasts according to Bloomberg.
Simon Roberts, chief executive of J Sainsbury, says the company won grocery market share for the sixth consecutive Christmas period, adding:
Fresh food sales grew by 8% and Taste the Difference was the fastest growing Premium Own Label brand in the market, with our best ever ranges of Christmas innovation driving Taste the Difference Fresh sales growth of 15%.
Grocery sales at Sainsbury’s supermarkets rose by 5.4% in the quarter, but general merchandise and clothes sales fell by 1.1%.
Argos also struggled, with its sales falling by 1% in the quarter.
Roberts insists Argos is making progress, telling the City:
The Argos transformation plan continues to make progress, delivering volume growth across the whole quarter despite significant headwinds from online traffic trends, a tough and promotional general merchandise market and weak consumer confidence.
Coal could be a potential stumbling block in these latest Rio Tinto/Glencore talks.
Rio divested itself of the dirty, polluting fossil fuel in the last decade; in 2018 it became the only major global mining company to have no coal assets.
Glencore, though, is one of the world’s largest producers and exporters of seaborne traded thermal and steelmaking coal.
Rio and Glencore also held talks in 2024 about a possible tie-up, but were unable to reach agreement on issues such as valuation.
Since then, Rio Tinto has appointed a new chief executive, Simon Trott, who has been focusing on cost-cutting and asset sales.
John Ayoub, a portfolio manager at Rio shareholder Wilson Asset Management, says (via Bloomberg):
“This is Simon’s first test as CEO and I would expect his disciplined approach to be carried through to M&A.
Introduction: Rio and Glencore in talks over mega-merger
Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.
Talks are underway to create the world’s largest mining company.
Rio Tinto is in talks to buy rival Glencore, a move which could create a company with a combined value of over $200bn (£152bn).
The two companies confirmed in statements overnight that they have been discussing a potential combination of some or all of their businesses, which could include an all-share takeover.
Both companies hold significant copper mines, which are profiting from prices hitting record levels; a combination could create a powerful rivalt to the world’s largest miner, BHP Group.
Glencore told shareholders:
Glencore notes recent media speculation and confirms that it is in preliminary discussions with Rio Tinto plc and Rio Tinto Limited about a possible combination of some or all of their businesses, which could include an all-share merger between Rio Tinto and Glencore
The parties’ current expectation is that any merger transaction would be effected through the acquisition of Glencore by Rio Tinto by way of a Court-sanctioned scheme of arrangement.
Rio Tinto confirmed that the two companies have been “engaging in preliminary discussions about a possible combination of some or all of their businesses”, and that any merger transaction would involve it buying Glencore.
The two companies have previous; back in 2014, Rio rejected a merger approach from smaller rival Glencore.
The mining sector is no stranger to talkover talks, and indeed failed approaches! BHP has been rebuffed in its attempts to take over rival miner Anglo American, which is itself taking over Teck Resources.
The agenda
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7am GMT: German trade and export data
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9am GMT: UN food price inflation report
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1.30pm GMT: US non farm payrolls
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3pm GMT: University of Michigan’s US consumer confidence report
