As emerging markets investors, the global food crisis feels especially topical at present, with the knock-on effects of the Ukraine conflict driving already-fragile nations to potential humanitarian, political and economic disaster. At a United Nations meeting in mid-May on global food security, Secretary-General Antonio Guterres delivered the unwelcome truth that the current food crisis "threatens to tip tens of millions of people over the edge into food insecurity."

The crisis is affecting around 3 billion people globally – approximately half the world’s population – and while it can be argued that it affects consumers worldwide, there is no denying that lower-income nations will suffer the most profoundly.

Examples of the impact on emerging markets countries

• Colombia: given neighbouring Brazil’s position as the world’s largest fertilizer importer, rising input prices across the region will mean higher food prices and increased pressure on governments.
• India: although self-sufficient in wheat and rice production, domestic price increases are likely to continue, and with over 45% of Indian consumer spending on food, the government will come under pressure to act.
• Iran: regional protests have broken out following an end to the government subsidy for imported wheat, a decision which quickly led to a rise in the cost of flour and bread.
• South Africa: famine in neighbouring countries could put extra pressure on the government’s budget, due to the need to provide food aid and manage potential mass immigration.
• Turkey: one of world’s largest importers of wheat, much of which is used for milling and reselling as flour. Supply disruptions will be unwelcome when companies are already struggling with rising imported inflation.

In our piece, we also discuss:

• Prices rise across the food system. Known as the ‘breadbasket of Europe’, wheat exports from Ukraine have captured the headlines in recent months. However, sunflower oil supplies are also short. What does this mean for consumers?
• Record-high fertilizer prices are hurting farmers’ pockets globally. In the UK, the price increased from £200 per tonne in the spring of 2021 to £700 by the autumn. How are these price increases impacting small farms in the world’s poorest nations?
• Social unrest and political pressure are often driven by rising food prices. Which countries in our universe are at most immediate risk, based on our internal ‘Food Vulnerability Score’ estimates?

The unprecedented market conditions of 2022 have made our top-down, thematic approach more relevant than ever. As long-term owners of the companies in which we invest, we seek to understand the broader implications of political crisis and social upheaval, and how these are likely to affect companies and their supply chains.