Food prices around the world are surging faster than ever before as the war in Ukraine rages on leaving a quarter of world crop supplies locked in Ukraine and Russia. Events in Ukraine are pilling inflationary pressure on consumers leaving some experts to suggest ‘almost a guarantee’ of a recession occurring if not worse, sparking a global hunger crisis.
The surge in food prices began even before the war in Ukraine broke out, but with Ukrainian ports now closed and vessels, in general, avoiding that region, crop and fertilizer supplies are stretched thin. This rally in food prices will be most notably felt in poor countries where groceries make up a large share of a household’s budget.
The FAO Food Price Index hit a record high of 159.3 in March of 2022, up 12.6% from February. The largest gainers were cereals rising by 17.1% month-over-month followed by grains and oils.
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Kroger Co. stock chasing record highs
In midst of rallying food prices, Kroger Co. (NYSE: KR) was upgraded to ‘buy’ from ‘neutral’ by Bank of America (BoFA) (NYSE: BAC) leading the shares to rise before the market open. BoFA also raised its price target for KR to $75 from $61 that they had as a target for the stock. Grocery inflation is according to them a tailwind that will propel the stock up.
Currently, the stock is trading above its 20-50-200 day Simple Moving Averages and is almost at its all-time high of $62.58. Previous resistance lines to the downside now seem far behind, it will be interesting to track charts and see where new resistance lines will be created.
Wall Street analysts agreed that the stock was a hold and out of the more prominent analysts BoFA was the first to raise their price predictions. Analysts saw the next 12-months average price at $55.19 which is now -11.10% behind the current trading price of $62.08.
If the price reaches the recommended $75 which is currently the highest price analysts see for the stock in the next 12 months, the stock would have another 20% to go.
Global food challenges
Surging costs in food are spurring some countries to hold off on imports and exports of food, seek new suppliers, or utilize their own stockpiles for the time being. There are fears that an additional 40 million people will be pushed into extreme poverty due to current geopolitical tensions.
In order to offset some of the rising costs, investors can try and invest in companies that will experience tailwinds due to the new global environment and challenges. Kroger could possibly benefit from rising food prices, and help their shareholders breathe more easily throughout this crisis.
Market participants will do well to follow developments around the global food supply which are predicted to get worse before they get any better. There are certainly additional companies that will stand to benefit from food shortages. Shrewd investors would be prudent to have those on their watchlists and act accordingly.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.