Image source: Getty Images
Inflation had already started to put a major squeeze on consumers by the spring of 2021. At the time, I’d discussed how this could impact food prices going forward. The Dalhousie University Canada Food Price Report for 2022 projected that food costs would rise between 5% and 7% this year. Unfortunately, recent events may make that grim projection a hopeful one. Today, I want to discuss why food prices may be headed higher in the months ahead. Moreover, I’ll look at three TSX stocks that you can explore to provide a hedge against these punishing cost increases.
Why food prices are set to spike in 2022
Last week, I’d discussed why the fertilizer giant Nutrien saw its stock spike to start the month of March. Russia launched a full-scale invasion of Ukraine on February 24, 2022. This sparked condemnation and a slew of massive sanctions from NATO and European Union allies. Russia is a massive global supplier of fertilizer, while Ukraine is often referred to as the “breadbasket of Europe”. The war and subsequent sanctions have led to a surge in wheat futures and the promise of destabilization in the global agricultural space.
Canadians may start to feel the pinch of higher food prices due to the impacts of this devastating conflict. Indeed, the price of grain-related products are expected to experience the largest increase. Dalhousie University also projected higher meat and dairy product prices. Investors should prepare accordingly.
Here’s a TSX stock in the meat space to target right now
Maple Leaf Foods (TSX:MFI) is the first TSX stock I’d look to target in this environment. This Mississauga-based company products food products in North America and around the world. Shares of Maple Leaf have dropped 5.6% in 2022 as of close on March 7. The stock is still up 7.2% year over year.
The company unveiled its final batch of 2021 earnings on February 24. Sales increased 5.1% year over year to $4.52 billion in 2021. Its Meat Protein Group delivered sales growth of 8.1%, while the Plant Protein Group saw sales decline 4.7%. Regardless, its foray into plant-based alternatives remains a promising point for Maple Leaf going forward.
Shares of this TSX stock are trading in favourable value territory compared to its top competitors. It offers a quarterly dividend of $0.20 per share, representing a 2.9% yield.
Two TSX stocks that are heavyweights in grocery retail
Grocery retail TSX stocks proved to be a fantastic hold during the COVID-19 pandemic. Canada’s top grocers could see their product prices receive a big bump in the weeks and months ahead.
Loblaw Companies (TSX:L) is the top grocery retailer in Canada. Shares of this TSX stock have climbed 7.8% so far this year. The stock has soared 69% in the year-over-year period.
In 2021, Loblaw delivered revenue growth of 2.6% to $53.1 billion. Meanwhile, adjusted EBITDA increased 13% to $5.58 billion. Moreover, adjusted diluted net earnings per common share jumped 36% to $5.59. This TSX stock possesses a favourable price-to-earnings (P/E) ratio of 20. It offers a modest quarterly dividend of $0.365 per share.
Empire Company (TSX:EMP.A) is another grocery retailer that is worth targeting in early March. Its shares have jumped 10% in the year-to-date period. The stock is up 15% from the same time in 2021.
Investors can expect to see Empire’s third-quarter fiscal 2022 results on March 10, 2022. Shares of this TSX stock possess a favourable P/E ratio of 15. It offers a quarterly dividend of $0.15 per share. That represents a modest 1.4% yield.
