Although prices have fallen from the highs reached at the start of the year, the situation is expected to remain tight in 2023 and beyond.
In 2022, food prices have increased dramatically for many people. Although prices have fallen from the highs reached at the start of the year, the situation is expected to remain tight in 2023 and beyond due to falling grain stocks, low raw material reserves, rising fertilizer and energy prices, as well as the impact of the conflict in Ukraine on agricultural production. This is according to a recent market report from Columbia Threadneedle Investments.
The transition is accelerating
“The chain of events that has led to a dramatic rise in food prices and an increase in world hunger since 2020 has been remarkable, but will not remain uncommon in the future. The physical impact of climate change, the volatility of energy prices as part of the energy transition, the increase in water stress and the decline in biodiversity will continue to increase the pressure on the food system in the coming years. years and decades,” said Olivia Watson, responsible investment analyst at Columbia Threadneedle Investments. Increased awareness of these pressures and, importantly, a policy reversal should accelerate the transition to a more resilient and sustainable food system.
Five pathways to a sustainable food system
To better understand how changes towards a sustainable food system can impact investments, Columbia Threadneedle has identified five interrelated cross-cutting themes:
- Increased resistance to climatic and water stress
- New ways to improve productivity
- Decarbonization of food production
- More efficient protein production
- Improved access to affordable food and healthy diets.
“Each theme depends on advanced policies and technologies, which brings risks and opportunities for the food sector. We use them as a framework to identify sub-themes, key technologies for success, and impact on established food and agriculture businesses and new ventures.”
The reduction of food waste as a target
A third of the food produced in the world ends up in the trash. Olivia Watson: “Reducing food waste is therefore one of the main drivers for increasing productivity in the sector”. At the same time, it would save 8-10% of greenhouse gas emissions and significantly reduce negative environmental effects such as water and land consumption. “At every stage of value creation, reducing food waste can create markets for new technologies, new products and new business models. At the same time, it helps companies retain customers, promote innovation in supply chains and reduce costs”.
Potential throughout the value chain
Thus, food waste can be reduced even before harvest, for example through the use of enzymes and microbes or improved irrigation and harvesting techniques. During processing, plain packaging or digitized logistics help to reduce waste. According to the study, the greatest potential for food to serve its true purpose and feed people is found along the path to the consumer through improved consumer awareness, direct-to-consumer models or the upcycling of by-products. “Preventing the waste of life must also become a central adjustment variable in companies in the sector in order to achieve their climate and biodiversity objectives,” concludes Olivia Watson.