Looming grocery price shock to impact on these ASX shares

Consumers should brace for higher grocery prices, but you might be able to hedge against this through some ASX shares.

| More on:
Food price shock ASX shares expensive, shock, price, cost

Consumers should brace for higher grocery prices, but you might be able to hedge against this through some ASX shares.

Experts are warning that you could get a price shock the next time you fill your basket at the local supermarket as a range of soft commodity prices have surged.

These include corn, wheat, soybeans, vegetable oils, reported Bloomberg. This small handful of staples, which form the backbone of much of the world’s diet, have become dramatically more expensive.

Soft commodity prices surge to eight-year high

“This week, the Bloomberg Agriculture Spot Index — which tracks key farm products — surged the most in almost nine years, driven by a rally in crop futures,” reported Bloomberg.

“With global food prices already at the highest since mid-2014, this latest jump is being closely watched because staple crops are a ubiquitous influence on grocery shelves — from bread and pizza dough to meat and even soda.”

Food prices set to rise even further

Cheap lobsters and wine aside, no thanks to belligerent China, food price inflation is probably just around the corner for Aussies.

Higher grocery bills will add to inflationary pressure. This creates a headwind for our economy that’s trying to recover from COVID-19.

“There seems to be sort of a bullish force behind the prices internationally,” Abdolreza Abbassian, senior economist at the United Nations’ Food and Agriculture Organization, said in an interview with Bloomberg.

“The indications are that there is very little reason to believe prices would remain at these levels. It’s more likely they will rise further. Hardship is still ahead.”

ASX shares that benefit from higher commodity prices

But food inflation isn’t all bad news for some ASX shares. In fact, the Graincorp Ltd (ASX: GNC) share price and Elders Ltd (ASX: ELD) share price are direct beneficiaries.

Fertiliser manufacturers like the Nufarm Ltd (ASX: NUF) share price and Incitec Pivot Ltd (ASX: IPL) share price should also find support.

ASX supermarkets could do well too

And if you thought that ASX supermarket shares will be under pressure from higher food costs, think again!

Assuming that they act rationally and pass on these costs to consumers, the higher price at the checkout will make their quarterly sales growth updates a pleasing read for shareholders.

In other words, all things being equal, the Woolworths Group Ltd (ASX: WOW) share price, Coles Group Ltd (ASX: COL) share price and Metcash Limited (ASX: MTS) share price could provide a nice hedge against any price sticker shock!

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

Motley Fool contributor Brendon Lau owns shares of Elders Limited, Nufarm Limited, and Woolworths Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended Elders Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News