Written by: Thomas Kostigen
Food prices are soaring. Food inflation has broken records in recent months, hitting all-time highs in August because already strained supply chains faced further pressures from the COVID-19 pandemic. An increasing global population relying on shrinking natural resources has put food supplies in the spotlight.
According to the Food and Agriculture Organization of the United Nations, food demand is set to rise 70 percent by 2050. Much of that demand will be from Asia, Eastern Europe, and Latin America, as those populations and economies grow. In the United States, food prices are actually forecast to steady over the coming decade as technology and efficiencies ease supply strains. That said, food industry stocks are experiencing terrific returns in the here and now. The S&P Food & Beverage Select Industry Index, for example, is up 19.6 percent over the past year. And the Dow Jones food index, as well as specific exchange traded funds in the sector, have also outperformed.
Food industry analysts are bullish even if it comes at the expense — or because of — consumers’ wallets.
One of the biggest sub sectors to consider is health food. Plant-based, organics, and products that boast additional nutritional value are growing at a fast clip. Indeed, they are driving a huge portion of the private capital markets and mergers and acquisitions in the space are equally robust as big brands snap up smaller startups. This can often be a good indicator of areas in which to invest in the public markets. If well-capitalized private investors are willing to invest in private companies on the hopes that returns will be worth the risk, then investors in the public markets who take far less risk and enjoy liquidity may want to consider jumping in, too.
Take health foods. According to Brandessence market research, “North America is expected to capture a significant share in the global health food market due to the high awareness regarding the health food, high disposable income, increasing prevalence of chronic diseases and rising number of product offerings.” It goes on to cite the positives of health on heart disease, diabetes, stroke, and cancer. The World Health Organization reported last year that an unhealthy diet, and paucity of physical movement are prominent global risks to health.
Positioning food as not only sustenance but a health benefit is a massive shift in global marketing and supply strategies at food groups. Different foods — healthier foods – are and will be further emphasized.
This is reason why more plant-based food products are being launched. To be sure, retailers benefit from increased demand for health foods, too, as prices tend to be higher for those items.
So where to invest—in the grower, the commodity, or the retailer? Each has its own risk profile, yet all are benefitting from higher demand.
Three foods — rice, what, and maize—comprise the major of people’s diets all around the world. They are a good place to start investigating when it comes to investing and figuring at which stage you might invest along the pathway to your stomach.
A good financial advisor can inform you of the different food companies to consider for your portfolio, or whether you should lose your appetite for the sector altogether based on other portfolio factors.
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Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.