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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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!

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

Unsure man analysing data on laptop.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors endured a rough day of trading this Tuesday.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Share Market News

ASX 200 takes the latest RBA interest rate verdict in stride

The ASX 200 looks to have shaken off today’s RBA interest rate call.

Read more »

A mature-aged couple high-five each other as they celebrate a financial win and early retirement
Share Gainers

Why this ASX 300 stock is soaring 12% after a disastrous year

This company has had a dramatic reversal of fortunes this Tuesday...

Read more »

A young woman wearing overalls and a yellow t-shirt kicks one leg in the air showing excitement over the latest ASX 200 shares to hit 52-week highs
Share Gainers

Why Core Lithium, Imugene, Lifestyle Communities, and Mineral Resources shares are charging higher

These shares are having a good session. What's going on?

Read more »

A miner stands in front oh an excavator at a mine site
Broker Notes

Broker says buy the dip on ASX 200 uranium share with 69% upside

Shaw and Partners says this ASX uranium stock is trading at an attractive price point right now.

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Domino's, Lynas, Paladin Energy, and St Barbara shares are sinking today

These shares are having a tough session. What's going on?

Read more »

A young woman smiles as she rides a zip line high above the trees.
Share Gainers

4 ASX All Ords shares up 315% to 682% in a year!

Investors have sent these ASX All Ords shares flying higher. But why?

Read more »

Woman on a swing at a beach, symbolising passive income.
Dividend Investing

Overinvested in Fortescue shares? Here are two alternative ASX dividend stocks

Let’s unearth some other passive income opportunities.

Read more »