1. Food security risks are rising again
Countries are packing cellars for a risky future.
For all of human history, stashing away extra food, primarily grains, was a critical hedge against starvation. During years with poor weather or pests or diseases impacting crops, populations could draw down their emergency reserves to get by. Those practices went away only a few decades back, as traders and multinational companies (hint: "ABCD" (opens a new window)) built a just-in-time inventory system for food raw materials.
As we start this new year, some nations are growing anxious that this sophisticated machine of global food trade, might be headed for a breakdown. Geo-political tensions are the highest they have been since 9/11. Economic tensions and tariff activity are at levels not seen since the 1930's. Global warming continues to drive extreme weather, increasingly impacting crop production. Lastly, snarled pandemic supply chains reminded the world of the dangers of relying on ocean vessels to feed their people.
Countries are right to be nervous, and some, are starting to stock their pantries for what fresh trouble might lie ahead. Their instincts are rational, but the result could be an upward spiral of commodity prices, hitting poor nations the hardest and accelerating already stubborn and widespread inflation. With peace and great weather, it will all be fine.
2. The pyramid tilts toward protein
Beef! It's for breakfast, lunch, and dinner!
Last week, for the first time since 2011, the USDA released (opens a new window) significant and sweeping changes to American dietary guidelines. These guidelines were for many years visualized with the iconic Food Pyramid. That changed in 2011 to a more interactive online system called MyPlate (opens a new window), and now again have been updated and delivered via a slick new web page called Realfood.gov (opens a new window).
The new guidelines are one of the many MAHA initiatives (opens a new window) aimed at improving the general health of the nation and reducing our incredible rates of chronic disease (opens a new window) and enormous associated spending. The changes are also designed to support American farmers, ranchers, and food companies. While these motivations are sincere and important, obvious conflicts of interest will make one of them far more certain than the other.
Dietary guidelines have historically been set by an objective and science driven committee, but this time around that committee was replaced with a handpicked review team, the majority of whom have obvious ties to the protein and dairy industries. (opens a new window) Perhaps not surprisingly, the new pyramid, heavily features animal protein and dairy, and does so in the upper left-hand corner where our eyes naturally gravitate. The new recommendations are not without negative side effects, as increasing consumption of these animal proteins is correlated with cardiovascular disease, as well as significant environmental impacts (opens a new window).
The new guidelines focus on the importance of eating "real foods", rather than processed foods, which has been a consistent goal of the MAHA agenda throughout the first year of this administration. This shift, if behavior follows guidance, will without a doubt lead to better collective health outcomes, but the loss of objectivity in the advisory process should concern us all.
3. Legal outcomes that could reshape coverage
"Rounding Up" the news: Glyphosate litigation.
Over the past couple months, litigation related to the Bayer product RoundUp has intensified, highlighted by the Supreme Court agreeing to hear a pivotal case (opens a new window), and Bayer launching an insurance-coverage battle with AIG (opens a new window). RoundUp is a herbicide that was released in 1974 by Monsanto, and contains the active ingredient glyphosate which has been studied for possible links to both health and environmental problems. Monsanto was acquired by Bayer in 2018, very unlucky timing as a massive number of lawsuits would soon follow.
Bayer contends that it's liability should be limited since it had followed federal labeling laws based on EPA research (opens a new window). Those labels did not contain a cancer warning, which is the basis of the thousands of State level lawsuits the company is now trying to curtail. Bayer also asserts that the over $10B of settlements they have paid over the years should be in effect bailed out by decades-old liability policies issued to Monsanto.
The outcome of the SCOTUS review could dramatically reshape liability exposure for both Bayer and the insurance industry (opens a new window). Until then, large verdicts, tens of thousands of active claims, and insurer–policyholder disputes will continue to weigh on the casualty and reinsurance markets across the broader Ag supply chain.
4. Growth pressures push CPGs to acquire
Old guard CPGs are searching for M&A.
Consumer preferences in the food space never stop shifting, and it is often the nimble startups that beat the old CPGs to the trends. Many of the new categories in the last decade could be put into the general bucket of "better for you". This could mean healthier, or it could mean better for the environment such as organic or low-carbon footprint. Many products have even seen explosive growth by seemingly mature product categories and designing better packaging and using shallow marketing adjectives like "heritage" and "reserve".
As sales for the larger CPG companies have generally flattened (opens a new window) in legacy categories, they are looking to grow both sales and margins by filling their portfolios with new brands. Private equity groups are chasing these same high growth targets, and everyone will swing harder if the forecasted 75 bps in rate cuts materialize in 2026.
5. The economic ripple of Dry January
What is "Dry January" worth? It depends on the state!
Surveys indicate up to 25% of adults who drink alcohol will participate in Dry January this year. That is millions of people in the U.S. alone, a huge increase for the trend that began in the U.K. back in 2013 (opens a new window). This might be good for health and wallets, but bad news for liquor manufacturers, including one U.S. distiller even halting production for all of 2026 (opens a new window), as warehouses hit record levels.
Marketing teams are never far behind, and Cannabis companies are using this month to attract new customers with catchy slogans like "High and Dry January" (opens a new window).
