Can Emerging Market Consumers Keep Spending?
“In these developing economies, households tend to spend 55 to 60 percent of monthly income on food and fuel, because they don’t have the high health care and housing expenses of the developed world,” he noted.
“Food prices have a huge impact on emerging market consumers potentially in China — which is a huge importer of soybeans and the second largest consumer of corn — and in places like Mexico." (Read More: Massive US Drought Leads to Worst Fears for Corn Crop).
Riedel prefers the companies that will benefit from the drought. He likes Latin American farming company Adecoagro that will benefit from higher prices and fertilizer companies like Potash as farmers look to improve crop yields.
“You want to be cautious on food producers in emerging markets because they will get squeezed by higher input costs,” he warned.