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Countries are panic buying food and this isn’t reflected in ASX agriculture stocks

It isn’t only Aussie shoppers that are guilty of panic food buying. Countries are rushing to snap up agricultural products and this could be a good sign for some ASX stocks.
The post Countries are panic buying food and this isn’t reflected in ASX agriculture stocks appeared first on Motley Fool Australia. –

Walnuts

It isn’t only Aussie shoppers that are guilty of panic food buying. Countries are rushing to snap up agricultural products and this could be a good sign for some ASX stocks.

I don’t believe this news is factored into the share prices of listed agribusinesses, but that could soon change.

It seems that countries from Egypt to China are scurrying to boost their strategic food reserves, reported Bloomberg.

Countries joining the food buying spree

Jordan is holding record wheat reserves and Egypt, the world’s top buyer of the grain, took the unusual step of tapping international markets during its local harvest and has boosted purchases by more than 50% since April.

Taiwan also indicated it will add to its food reserves and China is buying to feed its growing hog herd, according to Bloomberg.

Agriculture prices on the rise

The shopping spree comes at a time when the resurgence of COVID-19 in many parts of the world is disrupting global supply chains.

The disruption and increased demand are pushing prices for food up. Floods in China and bad harvests in Turkey and Morocco are also contributing to food inflation.

The Bloomberg Agriculture Subindex, which measures key farm goods futures contracts, jumped by nearly 20% since June.

Drivers for the agri boom

Experts who were interviewed point to a fundamental shift from “just in time” to “just in case”.

So far, it’s only a relatively small group of countries that are worried about being caught out. But if other governments joined the fray, we could see higher food prices through 2021.

Australia’s most important trading partner will have no small part to play in this trend. China is single-handedly supporting the iron ore price, much to the benefit of BHP Group Ltd (ASX: BHP) and friends.

China’s impact on food prices

The Asian giant could have a similar effect for commodities as it looks to build on its colossal food reserves as part of its five-year plan.

The irony is that China is punishing Australia by restricting imports of our barley, beef and wine. It no doubt has other sources to buy from, but it may have to loosen the block to reign in higher prices.

ASX stocks to benefit from rise of agriculture

As I mentioned earlier in the piece, I don’t believe investors have caught on to the potential agriculture boom.

Some ASX agriculture-exposed stocks that could benefit from this possible thematic include the Costa Group Holdings Ltd (ASX: CGC) share price, Nufarm Limited (ASX: NUF) share price and Graincorp Ltd (ASX: GNC) share price – just to name a few.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Nufarm Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Countries are panic buying food and this isn’t reflected in ASX agriculture stocks appeared first on Motley Fool Australia.

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