Food strong in stock markets

FOOD and beverage companies are consistently outperforming other sectors in Europe’s falling stock markets, according to a report issued by Davy Stockbrokers yesterday.

While Europe’s equity markets have been falling for eight consecutive weeks, food producers gained from the general defensive buying, rising 0.5%. Beverages fell 1.2% on the week.

The E300 index has fallen 1.1% in the past week as worries about the macro situation in Europe increased.

For the year to date, the overall marginally negative performance of beverages (-3.5%) and food producers (-0.3%) must be read in the light of the overall market, which is down 4.2%.

The Davy analysts note that the overall negative macro environment is feeding into commodities, noting that corn, soybeans and wheat have all fallen as predictions of better harvest are expected to push down prices.

Nonetheless, Davy’s report suggests that the overall picture for food is positive when read against the performance of other commodities. For instance, Brent crude fell 7% as the International Energy Agency (IEA) announced that it would increase supplies.

Meanwhile, food companies will also be encouraged by the likely upward pressure on price contained in a new study suggesting that investment in agriculture must rise by €65bn a year to meet the world’s growing food needs.

Global Harvest Initiative (GHI) executive director William Lesher said: “There are simply not enough resources in either developed or developing nations to bridge this sizeable gap, so enhanced private-sector involvement is the key to improving agricultural and rural development to ensure that the world’s future agricultural needs are met.”

The United Nations has said that by 2050, food production must increase by 70% to feed an estimated world population of nine billion people, up from almost 7 billion.