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Patrick

00:00

How many conversations have you been having recently with friends, clients and colleagues about who might run to be the US president in 2028? There's clearly been a lot of ink spilled about last week's midterms, but if you strip away all the noise, one issue stood out above the rest for voters, and that's the cost of living.

So, while everyone's dissecting the election results, let's stick with that cost-of-living issue and look at one part of it that perhaps isn't getting enough attention. But I think we're going to hear a lot more about in the future. And that's food security.

I'm Patrick Coffey. This is the Barclays Brief, and I'm in London with Maggie O'Neal, our expert on food security and our global head of sustainable thematic and policy research.

Maggie thanks a lot for being here today.

Maggie

00:45

Thank you for having me. I do think that it is a really, really important area to focus on. There seems to have been a tipping point, as it were, as we saw the drought take hold in Europe and people started thinking differently about these topics and is definitely rising up in areas of importance, even if it's not fully mainstream just yet.

Patrick

01:11

Well, that's exactly what I wanted to talk to you about it.

At the Barclays Brief, we like talking about these underexplored themes, let's just start with the basics on food security. When we talk about that. What do we actually mean?

And can you help me understand the link between food security and food price inflation?

Maggie

01:22

Yeah, I think that's a really good question. And I think it is important to break it up into those two pieces. So, for thinking about food security, at its simplest it is just where are you getting the food that you ultimately need to have on your table?

How are you feeding your populations? How are you feeding your family? That's food security at its essence, the food inflation point. And I think this comes really nicely into what you said at the beginning about that cost of living question. This is huge. People are seeing their own grocery bills rise. It is putting pressures on families. And so that food inflation piece is inextricably linked to food security, although they don't come through it exactly the same time.

So, sometimes you might have a crop fail. It's not that you're going to see it immediately in terms of how expensive a good is in the supermarket, but it will come through and it's going to hit consumers ultimately.

So, we have the food security piece tied sometimes with the lag to that food inflation piece, which also plays into the broader cost of living element, which has been key in elections around the world.

Patrick

02:26

Yeah. And it will continue to be no doubt. So, I was reading one of your recent notes last night and I underlined a couple of stats.

So, you talk about how the global population is moving towards 10 billion by 2050, and how that could lead to a 50% increase in demand for food. So, we've got demand growing. But you're talking about resources sometimes being constrained.

What stops us from simply producing more food?

Maggie

02:51

In a perfect world, all laid out plans would go exactly as they're supposed to. You say I have a growing population; I'm going to plant Exmoor. Acres have increased yields. Happy days.

Unfortunately, we don't live in a perfect world. We do have a population which is continuing to grow. We also have increasing extreme weather events, which the fundamentals of farming shows you that weather does impact that.

And then you also bring in geopolitics and supply chains that have gone from very local to global in basis.

So, with all of these things coming together, you have an intention to find ways to feed the population, which is growing and to move that forward. But unfortunately, life throws up surprises. We started looking at this topic at the start of the year, when we saw the war in the Middle East, and we started seeing fertilizer prices rising and concerns about how are you going to get this very fundamental nutrient so that you can plant crops?

Then you saw discussions around Super El Nino. Then you saw the drought in Europe come up. So a lot of these issues that are being planned for in the longer term, they're facing disruptions on the ground as the world's uncertainty plays out.

Patrick

04:06

Okay. So that's the long-term kind of setup. Let's talk about the short-term challenges and the near-term risks.

There are loads of them. What concerns you the most?

Maggie

04:14

One to watch for the near term is definitely food inflation. We're starting to see this come through. But because of the way that consumer companies have been hedging, the full impact of it is likely also to hit your consumers as you're going into the second half of 2027. That may seem like it's ages away, but it's actually just around the corner.

But the food inflation piece, particularly when you move from developed markets to emerging markets where food is a bigger part of their basket of goods and therefore a rise in price, there can have a disproportionately negative effect which has knock on destabilising impacts around the globe. All of this is coming together in a perfect storm, and that's where I think this topic is only going to grow in importance as we move into next year.

Patrick

05:01

Okay. We talked about a perfect storm. Talk to me about El Nino. How much of a concern is that for you near-term in terms of this theme around food security?

Maggie

05:10

So, starting with what is El Nino? El Nino is a natural weather phenomenon. It happens every 1 to 7 years. Why do we care now? It's because this one is looking to be a really, really powerful El Nino.

Some people in the press of referred to it as a Godzilla El Nino. So, it's going to be very impactful. Why does this matter? Well, going back to what I was saying earlier, in terms of that food security piece, weather plays into crops, it plays into yields.

So, you have to care about it now. El Nino doesn't affect every crop in the same way.

It depends on locations and the existing vulnerabilities. So, if you think of palm oil, cocoa, coffee, these are some of the crops that look like they are going to be particularly affected for some of the crop-based grains, for example, you'll have disparate effects depending on which area you're looking at around the globe.

One of the things which is super, super important to remember about this is that El Nino builds in intensity towards the end of this year.

It continues into next year, but the different transmission channels - so the way that this weather event is going to affect prices and commodities, it's going to come through in the next 12, 18 months, that is going to impact both food security and food inflation and impact how we think about even what we stock in our homes and what's available in supermarkets.

Patrick

06:37

Okay. That's concerning clearly. Another thing that's quite concerning to, to me and many other people in the UK is a government talking about stockpiling.

So, the UK government has just launched this ‘Be Ready’ campaign, effectively encouraging households to have access to sort of three days’ worth of food and water. Ray Mears is talking about access to water, a radio and a light, and others are talking about Sauvignon blanc, mascara and baked beans.

Regardless, it's a concern for consumers right now.

Is it actually just a sign that governments are starting to think about food security in the same way they think about energy security, i.e. not just in terms of price, but also security of supply? Is that the right way to think about it?

Maggie

07:18

I think that security piece is definitely essential and core to how we are thinking about it.

I think if we break it into a couple of pieces. You can say it could be scaremongering, for example, but then we've also seen a number of cyber-attacks in the past week across the continent, where the freezer temperatures have been turned up to such a degree that food has to be thrown out. So, there is not just a theoretical question of food security.

It is a real question of food security when it comes to that preparedness piece, I think at least I personally am taking it seriously. Maybe it is because I was a scout as a child, but that preparedness piece really resonated with me. And if we look back to the not-too-distant past of COVID, being ready was an essential element because you would go to the supermarkets and shelves would be bare.

You couldn't find what you needed. So, I think governments are realising that that food security piece is key. You have to prepare your population for an uncertain future.

Patrick

08:18

 Okay, so I haven't been stockpiling. You have, by the sounds of things?

Maggie

08:21

Yes. Much to the chagrin of my husband, we have been getting a lot more food. Tinned food. Not so much on the mascara side into the house. Pasta. The basics.

Patrick

08:33

Okay, so what can policy makers actually do to make the system more resilient though?

Maggie

08:38

I think there's both the near term and the longer-term pieces of this. And that's what we've been discussing near term. It's looking and this is a topic which has come up at the G7, the G20, European policymakers, US policymakers have all been looking at how do we address issues around fertiliser, not using food as a weapon as well, because you do have a tendency in times of crisis, countries close their borders. They focus naturally on their own citizens.

But with the supply chain, which is now global in basis, that can have a lot of unintended consequences and needs to be addressed. So, policymakers are putting in place the mechanisms to try to make things more resilient.

If we look at what's happening in the EU, you’ve seen an increased focus on the fertiliser, which I mentioned.

So, trying to help farmers and move forward ways to make the overall food system more resilient. You've also had really impactful shifts in terms of how they're thinking about genetically modified organisms (GMOs), or crops that have had seeds that have had a trait modified, and that has been a long, long discussion, which just got decided and shifted to favour evolutionarily expedited seeds, so that those are now going to be acceptable for farmers who are concerned about hot, dry summers.

They will then have the option to look for evolutionarily expedited seeds that maybe need less water and can still have the same yield. Those shifts are coming through on the ground, so there's progress being made at the margin. There's definitely more that needs to be done, but I don't think that it's all doom and gloom. Policymakers are seeing the risk on the horizon and are acting to try to make their populations more resilient.

Patrick

10:23

So that's good news. And policy is clearly one part of the answer. What about technology? What are you seeing in terms of potential solutions to help with this issue?

Maggie

10:31

If we're thinking about precision irrigation, low carbon fertilisers, the evolutionarily expedited seeds that I mentioned, there's a lot of good solutions that are out there. I think one of the challenges that needs to be addressed in coming to that policy point that you were mentioning earlier, you have to find a way to help farmers shift their behaviour.

When you are trying to adopt some of these new technologies, you sometimes have to create a safe space for farmers to still be able to earn a living while they're trying to put these new ways of farming into practice. But the technologies themselves, there are so many different ones out there and finding ways to crowd in funding, while having a supportive policy environment to really enable that change to be affected, that's what we need to see on the ground.

But it's not that we don't have the ways to solve the problem. We have to find a way to make it happen. And if I take a step back and think about where we are getting a lot of inbound questions, it's under a broader adaptation and resilience mindset that brings in strategic autonomy. It brings in security questions. It also brings these extreme weather events into play.

Underneath that is how are we feeding our people and how is that going to impact our populations going forward. So that food security and food inflation piece, that is absolutely critical under that broader adaptation and resilience umbrella and is only going to grow in importance into next year.

Patrick

12:01

Definitely, and it's only going to grow in importance for voters because as we said at the start, cost of living is key. And elections coming up this year, next year, the years to come. Cost of living is going to be crucial.

Thanks for being here.

Maggie

12:13

Thank you for having me.

Patrick

12:14

So, food security is about so much more than simply whether we have enough food to put on our plates today and tomorrow. It's increasingly an issue of national security, economic resilience and geopolitics.

But I think for me, the big picture is that as investors, we're very used to discussing energy security or semiconductor security or defence spending. But I think I'm walking out of the room today thinking that food security deserves to sit alongside these subjects as a mainstream economic and financial theme for investors.

Thanks a lot for listening to The Barclays Brief.

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