Whalesbook
How Global Crises Boost Food Profits
The surge in profits for major food companies isn't just a lucky break from global events. It's a direct result of deep-rooted problems built over decades. Global shocks, like the war in Ukraine and new trade disputes, have exposed how fragile food systems have become. These systems were designed to rely on imports, a trend driven by policies that weakened local food production and increased dependence on global markets.
Food Giants Reap Record Profits Amidst Consumer Strain
Major food companies are reporting significant financial gains, especially following global events. Fertilizer producers, including giants like Nutrien and CF Industries, have seen sales jump by almost 20% in the latest quarter. This is due to higher nitrogen fertilizer prices, partly worsened by disruptions in the Strait of Hormuz. Nutrien reported $6.05 billion in adjusted EBITDA for 2025. This success for fertilizer companies comes as nearly two-thirds of farmers worldwide expect lower net farm income in 2026.
Grocery retailers are also benefiting from market instability. Kroger's planned acquisition of Albertsons, intended to increase market control, has seen both companies report fluctuating valuation metrics. Kroger's Price-to-Earnings (P/E) ratio has risen sharply to over 40, well above its usual levels, with some figures reaching 60. This suggests a very high market valuation. Albertsons' P/E ratios vary more widely, with some showing a forward P/E of 11x compared to industry peers, while others indicate TTM P/E ratios around 40x or higher. This wide range in valuations points to market uncertainty or different views on how these companies will perform.
Economic Strain and Policy Roots of the Crisis
This profit surge happens as the world faces severe economic hardship. The global food import bill hit a record $2.22 trillion in 2025. Least Developed Countries (LDCs) and Net Food Importing Developing Countries (NFIDCs) saw particularly sharp price increases, worsening their already heavy debt burdens. This forces governments into difficult budget decisions.
Past policies, such as economic adjustment programs from the IMF and World Bank in the 1980s and 1990s, weakened local food production in many developing nations. This created a reliance on imports and made these countries vulnerable to global price swings. Today, this long-standing vulnerability is being exploited. Food prices, which peaked at 30% in some low-income countries in May 2023, remain very high, slashing buying power and harming nutrition.
Trade wars, especially between the U.S. and China, continue to alter global supply chains. New tensions in 2025 caused a 54% drop in U.S. agricultural exports to China in the first eight months of the year. This led China to seek more supplies from Latin America, possibly driving deforestation in areas like Brazil's Cerrado. This shift helps large commodity exporters but leaves smaller producers and import-reliant nations more exposed to price swings.
Why the System is Failing Consumers
The current agrifood system, according to the IPES-Food report, is clearly not working for most people worldwide. While big companies like Nutrien and other fertilizer makers gain record profits from supply disruptions, farmers are seeing lower incomes and higher costs. Nutrien, despite strong earnings, has a forward P/E of about 14x. This valuation suggests investors are cautious or have already factored in its growth potential. Grocery giants like Kroger, however, show much higher P/E ratios, sometimes over 40 or even 60, far exceeding their historical averages. This indicates extremely high market expectations for future growth, or valuations that are disconnected from past performance and potentially unstable.
The core problem is the widespread dependency created by past policy choices. Years of weakening domestic food systems through economic adjustment programs have left countries unable to protect themselves from global shocks. This makes them targets for large firms seeking maximum profits. Power is concentrated in areas like grain trading (ADM, Cargill) and fertilizer production (Nutrien), giving these companies significant ability to set prices, similar to how OPEC manages oil. This market power allows them to raise prices beyond what their own costs increase. The environmental impact of expanding production into biodiverse areas, driven by trade disputes, further highlights the current system's unsustainability. The planned merger of Kroger and Albertsons also signals a trend of increasing consolidation, which could reduce competition and further raise consumer prices.
Calls for Systemic Change
The IPES-Food report strongly recommends a major change towards "resilient self-reliance." This means building stronger local and regional food systems, decreasing reliance on unstable global markets, and reintroducing tools like public food reserves and ways to manage supply, which were dismantled starting in the 1980s. While some analysts are cautious about the agriculture sector due to rising input costs, others view companies like Nutrien favorably. They rate Nutrien as a 'Buy,' arguing its integrated model and strong 2025 EBITDA mean its growth potential in emerging markets is undervalued. The difference between Nutrien's more moderate P/E and the very high, often fluctuating, P/E ratios of grocery retailers shows differing investor views on risk and opportunity in the food industry. The report's findings suggest the system is failing broadly, benefiting a few while costing many.