Investors shift into emerging market food producers as disruptions in the Strait of Hormuz and rising costs drive food inflation concerns.
Emerging market food producers are attracting strong investor flows as supply disruptions in the Strait of Hormuz and higher fertilizer and energy costs push food prices higher. The Strait, a critical transit point for 20%-30% of global fertilizer exports, remains a key bottleneck amid regional tensions, exacerbating inflationary pressures.
Prior to the conflict, the Strait of Hormuz was a major conduit for energy byproducts used in fertilizer production, further tightening supply chains. Climate pressures and central bank responses, such as the Philippine central bank’s recent rate hike citing food and fuel costs, signal broader inflation risks across emerging markets.
While countries like Australia, Brazil, and Argentina stand to benefit from commodity exports, government interventions like price caps could limit margin expansion for staples producers. The conflict has created positive terms-of-trade shocks for some, but food insecurity remains a growing concern in EM economies.