Inflation hasn’t been at these levels in decades, and it is rippling its way through the food industry, rising prices of food (packaged, grocery and restaurants) hitting pockets of consumers globally.
The US Producer price index has been on a tear lately, up 13.4% in the year ending in February 2022, with grains, beef, and veal prices all rising by 20%. With the Russian aggression on Ukraine, war is literally on Western Europe’s doorstep. This spells further trouble for the already stressed food market as Ukraine is among the top 10 producers across various vibrant food sectors.
What do these dire circumstances mean for stocks? How can readers find quality stocks to park their money in the food sector? The following two stocks appear to be viable options.
Top of the crops
Deere & Company (NYSE: DE)
The dominant maker of farm equipment from the US, Deere, will benefit from more crops being cultivated due to potential food shortages globally. Rising food prices predict that farmers might do well, which bodes well for Deere.
The chart shows us that Deere is trading above 20-50-200 Simple Moving Averages (SMA) on the daily chart. Zooming out, we can see that Deere is not a cheap stock, trading close to its all-time highs, currently at $426.53.
Wall Street Analysts give Deere a ‘Moderate Buy’ rating, not seeing much upside potential but still remaining bullish on the stock. Besides its staying power, this stock also has a solid dividend at 0.98%, with a pretty constant payout.
Starbucks (NASDAQ: SBUX)
Restaurant stocks have generally been lagging the market in 2022. McDonald’s (NYSE: MCD) is down 11%, while Starbucks (NASDAQ: SBUX) is down 25%. Investors are rightfully frightened that higher food prices will put a squeeze on consumers.
Charts show that Starbucks is bouncing off of the lows, and a bit more patience is required to get the best entry position. A hard move above the 20 SMA may indicate a breakout, and those that are brave enough to follow may be well rewarded.
The analysts place a positive spin on the story, who see an upside of 33.27% with the highest price target of $136. The lowest price analysts predict sits at $95.00, which is quite above the current $86.41.
The above stocks are not without risks in this new world paradigm; however, they may be a bit overblown.
Food prices will be squeezed, and more fields will be worked to fill out possible food shortages. On the other hand, the end to Covid restrictions will fuel a desire to travel, which will benefit Starbucks.
How can anyone imagine their day without a cup of joe and their favorite cereal? Canny investors keeping an eye on food stock plays will find a way to benefit from their favorite stocks.
Disclaimer: At the time of publication, the author owned SBUX stock. The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.