Shares of agricultural companies have been outperforming their global counterparts since the beginning of the current quarter, as severe weather, the war in Ukraine and increased protectionism have led to higher food prices. Some investors say that getting into this sector is considered a good way to hedge against inflation.
This good performance of the sector’s shares is due to the fact that the food commodity price index recorded its largest gain in 16 months last month.
Mark Elliott, an investment specialist in the Clean Energy Transition at the “Union Bancaire Privee” in Geneva, said that it is advisable to go as far as food company stocks as a form of hedging and protection, similar to what is usually recommended in the oil sector. “Investing in agricultural companies is probably a good way to hedge against climate change and some geopolitical risks,”he added.
Factors contributing to the rise in food prices include heavy rains in Europe and China, unusually dry weather in Thailand, Russia’s decision to withdraw from the grain agreement with Ukraine, as well as India’s move to ban some rice exports.
“As weather patterns become more volatile, we see that food prices will continue to rise at a faster pace than in previous decades,” said Peter guarnery, head of equity strategy at Saxo Bank AS in Copenhagen. He added that the outlook for the sector remains positive, and even acquisitions will accelerate.
