Global food prices are surging to three year highs as heatwaves, wars and shifting energy policies push up the cost of wheat, sugar and vegetable oils. That squeeze is hitting some stocks hard while creating pricing power for others. For investors, ignoring these shocks could mean missing important risks and potential opportunities. This article explains how the news is affecting three specific stocks, with one potential winner and two under pressure.

General Mills (GIS)

Overview: General Mills is a global packaged food company that sells branded cereals, snacks, baking products, pet food and frozen meals, with well known labels like Cheerios, Betty Crocker, Pillsbury and Blue Buffalo across supermarkets, e commerce and foodservice channels.

Operations: General Mills generates most of its roughly US$18.4b in annual revenue from North America Retail at about US$10.6b, with additional contributions from International at US$3.0b, North America Pet at US$2.6b and North America Foodservice at US$2.2b.

Market Cap: US$19.2b

Investors may view General Mills with caution as global wheat, sugar and oil prices affect a business that leans heavily on cereals and sweet snacks, while it also manages supply chain issues and higher input costs. Management is running a large cost saving program and reinvesting heavily in brands at a time when unit sales are softening and analysts expect only flat to slightly weaker revenue. Recent impairments, a reported full year net loss and a dividend that is high relative to current earnings raise questions about how much pressure the balance sheet and payout can handle if commodity shocks persist. The company remains pricing, marketing and product heavy, which points to a more complex story than a simple defensive food stock.

General Mills’ cost cuts and high dividend may look reassuring, yet soft unit sales, a recent net loss and commodity shocks could be masking deeper strain. Get the full picture in the General Mills financial health report

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Wilmar International (SGX:F34)

Overview: Wilmar International is a Singapore headquartered agribusiness group that processes and markets edible oils, sugar, flour, rice, noodles, animal feed and biodiesel, and also runs palm oil plantations, sugar mills, logistics and port services across Asia, Africa and other regions.

Operations: Wilmar International generates most of its revenue from Feed and Industrial Products at about US$42.9b and Food Products at about US$30.9b, with smaller contributions from Plantation and Sugar Milling at about US$3.5b and Others.

Market Cap: SGD24.6b

Investors watching food supply chain shocks may see Wilmar International as one way to get broad exposure to vegetable oils, sugar and biodiesel in one integrated group. Changes in palm oil and vegetable oil prices, plus demand from the biodiesel sector, directly affect its core Feed and Industrial and Food Products segments. The planned joint venture in West Africa aims to deepen its presence in a US$12b addressable market. At the same time, an unstable dividend record, leverage concerns and earnings that have only recently improved mean the stock is not a simple commodity play. The mix of forecast earnings expectations, perceived valuation and balance sheet questions makes the next few results worth watching closely.

Wilmar International sits at the crossroads of food, fuel and rising commodity prices, yet the market may be glossing over how its edible oils and biodiesel exposure could reshape earnings quality. Get the context and key pressure points in the analysis report for Wilmar International

Unilever (LSE:ULVR)

Overview: Unilever is a global consumer goods company that sells everyday products across beauty, personal care, home cleaning and foods, with brands such as Dove, Vaseline, Knorr and Hellmann’s in bathrooms and kitchens worldwide.

Operations: Unilever generates about €12.9b from Beauty & Wellbeing, €13.4b from Personal Care, €11.7b from Home Care and €12.7b from Foods.

Market Cap: £101.4b

Unilever might appear to offer exposure to global consumer staples demand, yet the current spike in wheat, sugar and vegetable oil costs affects areas where its foods and dressings business is significantly exposed. Management has already highlighted volatile agricultural commodities and a need for more price increases. At the same time, high debt, frequent boardroom changes and a planned foods spin off with McCormick raise questions about execution and the balance sheet. Revenue and earnings growth are described as solid rather than exciting, while the stock trades on a premium P/E and analysts indicate only limited upside from current levels. For investors, one concern is the possibility of overpaying for perceived resilience at a time when input inflation and portfolio reshaping could make that resilience more challenging to sustain.

Unilever’s premium P/E and rising input costs could be masking more fragile resilience than the headline story suggests. Before assuming the dividend and foods spin off are safe anchors, read the full 4 key rewards and 1 important warning sign

Seeking Alternatives Before The Crowd Moves

Fresh ideas can move fast. Some stocks are building quiet momentum while others get caught dropping after commodity shocks. Scan these under the radar lists before the crowd and act now.

• Spot cash rich companies that may better handle future shocks by scanning this curated list of solid balance sheet and fundamentals (49 results) while it still flies under most investors’ radar.
• Target potential income workhorses with strong payouts by reviewing a focused set of 8 dividend fortresses before yields and entry points shift away from today’s levels.
• Track early movers in critical infrastructure by checking the hand picked 36 power grid technology and infrastructure stocks while valuations and attention are still catching up.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.