While most traders remain fixated on big tech earnings, there’s another financial story that’s being overlooked by many. Besides energy commodities and industrial goods, food prices have soared. Corn and soybean futures are trading near record highs, while the overall cost of food is expected to surge. Now one top CEO warned that a global food crisis is on the horizon, and Americans should tighten their belts.
Prices for food have already been rising over the past years, but the invasion of Ukraine has jeopardized a big piece of the world’s grain and oilseed supplies. Additionally, poor harvest in South America, mediocre planting weather in the U.S., as well as growing demand for biofuel alternatives have all exerted bullish pressures on food commodity prices.
Soybeans have gone up over 26% this year. Futures are trading around $17 per bushel, the highest price seen since the dry-hot summer of 2012. Corn futures are up 37% this year, reaching $8.24, which is just 15 cents short of breaking an all-time high for the commodity.
Less popular agricultural commodities have already broken new records recently. Prices for vegetable oils, oats, and wheat have already topped the charts so far in 2022. While droughts in South America have become a problem, it’s expected America could see a similar situation.
The current cold, wet weather is delaying planting in the Midwest. Just 7% of this year’s corn has been planted this week, compared to the 16% from a year ago. Soybean planting is similarly behind schedule.
The end result of this is that these high crop prices will spill over to the rest of the food industry. Just as how higher material costs get passed onto consumers, higher feed costs are raising the costs of meat and fish across the country. That also means that higher corn and soybean prices will indirectly push inflation figures even higher as food costs become more expensive.
While the Biden administration doesn’t expect any food shortages here in America, the U.S. government is providing aid to places that are at risk of running low on food. Especially given the current supply chain problems, which could make this entire situation even worse should a global food crisis become a real issue.
“We’re really conducting extensive diplomacy to encourage all countries to refrain from export restrictions and excessive stockpiling. It would exacerbate supply-chain challenges and price inflation,” said White House press secretary Jen Psaki. That’s a stark contrast with experts like Bob Unanue, CEO of Goya Foods, who warned that “we are on the precipice of a global food crisis” and that the world has “weaponized food” as a strategic resource.
The obvious winners of this entire situation are agricultural companies, specifically those involved in producing these crops, as opposed to pork and meat farmers. This includes stocks like Bunge (NYSE: BG), a global agribusiness producing wheat, corn, and sugar ethanol. Shares of BG are up over 24.7% so far this year, whereas the Nasdaq has plummeted 19.7% instead. Agri-stocks focused on these types of commodities have also largely outperformed the markets as well, nimbly avoiding this selloff typically seen amidst growth stocks.
