A global stock trader’s guide to navigating food inflation

economictimes.indiatimes.com:

Agriculture stocks are beating their global peers this quarter as extreme weather, the war in Ukraine and rising protectionism drive up food prices. Exposure to the sector is a good hedge for inflation, some investors say.

An index tracking total returns from select agricultural producers has outperformed the broader MCSI World Index by about three percentage points since the start of July, data compiled by Bloomberg show. The industry has outperformed as a gauge of food commodity prices posted its biggest gain in 16 months last month.

Some exposure is advised to food stocks, similar to what is usually given to oil sector, as a form of insurance, said Marc Elliott, energy transition investment specialist at Union Bancaire Privee in Geneva. “Investing in agricultural names is perhaps a good way to hedge against climate change and certain geopolitical risks.” Among the drivers for higher food prices were heavy rains in Europe and China, unusually dry weather in Thailand, Russia’s decision to scrap its grain accord with Ukraine, and India’s move to ban some rice exports.

There are plenty of reasons to think prices will keep climbing. A food-supply crisis is one of the top four threats facing the world this year, according to the World Economic Forum’s Global Risks Report 2023 published in January.

“With weather patterns becoming more volatile our view is that food prices will continue to rise at a faster pace than in previous decades,” said Peter Garnry, head of equity strategy at Saxo Bank AS in Copenhagen. The outlook remains positive for the industry, and even acquisitions will accelerate, he said.Machinery, FertilizersAmong the key beneficiaries of food inflation will be companies producing farming inputs such as