{"id":27182,"date":"2026-05-01T14:01:04","date_gmt":"2026-05-01T14:01:04","guid":{"rendered":"https:\/\/www.rbc.com\/en\/?post_type=rbc_tl&p=27182"},"modified":"2026-05-01T14:01:06","modified_gmt":"2026-05-01T14:01:06","slug":"a-perfect-storm-rippling-across-the-worlds-food-supply-chains","status":"publish","type":"rbc_tl","link":"https:\/\/www.rbc.com\/en\/thought-leadership\/the-trade-zone\/a-perfect-storm-rippling-across-the-worlds-food-supply-chains\/","title":{"rendered":"Trade Zone: A perfect storm rippling across the world’s food supply chains"},"content":{"rendered":"\n
\n
\n

Food prices were expected to stabilize globally in 2026, but disruptions have materially changed that outlook. Instead of easing, risks are now skewed toward renewed food inflation.<\/p>\n\n\n\n

The biggest geopolitical driver<\/strong> right now is the Middle East conflict, specifically disruptions to a critical artery\u2014the Strait of Hormuz\u2014for global energy and fertilizer trade. The World Bank now expects energy prices to jump roughly 24% in 2026<\/a>. This rise in energy prices matters for food prices as energy feeds directly into transportation, processing, and refrigeration. This is a classic second-round inflation effect: food inflation lagging energy inflation by several months.<\/p>\n\n\n\n

Disruptions to fertilizer supply chains<\/strong> is the hidden risk to food prices from conflict (and the most underpriced one). Fertilizer prices are projected to rise 31% as roughly a third of global fertilizer trade flows<\/a> through Hormuz, according to the World Bank. Urea, a key fertilizer vital for boosting crop yields, is up 86% in March 2026, compared to the same time last year, with a 53% jump since February alone on Middle East troubles.<\/p>\n\n\n\n

Generally, the fertilizer price shock creates a delayed but powerful effect: Farmers reduce fertilizer usage, leading to crop yields decline, a surge in food prices rise is triggered\u2014with a lag (2026\u20132027).<\/p>\n\n\n\n

<\/div>\n\n\n\n

We\u2019re already seeing early signals<\/a> of this effect with farmers expected to plant fewer acres of crops and tightening grain balances into the 2026-2027 season, according to the International Grains Council.<\/p>\n\n\n\n

Layering in climate risk<\/strong>, this year\u2019s food production outlook has flipped from benign to another accelerant to rising global hunger. This growing season, farmers are expected to face what projections are calling a \u201csuper\u201d El Ni\u00f1o-related disruption<\/a>, causing droughts across Asia and Australia, while potentially dumping the excess moisture in North and South America. These hard-to-predict weather dynamics could hinder production across the world\u2019s biggest breadbaskets growing rice, wheat, and soybeans.<\/p>\n\n\n\n

Globally, an estimated 363 million people are at risk of acute hunger in 2026<\/a>\u2014a rising number with growing conflicts and climate change effects, especially heat waves and droughts, that challenge food production and access in developing and unstable countries.<\/p>\n\n\n\n

In Canada, a nation of abundance, people experiencing food insecurity are most impacted by food affordability. And global disruptions are expected to rise prices even further in 2026. The most recent estimates from Canada’s Food Price report project a 4% to 6% jump in food prices for Canadians between 2025 and 2026-that’s nearly an extra $1,000 dollars on groceries per year for an average family of four.<\/p>\n\n\n\n

What to watch for: <\/strong>Reactive policy from food inflation could further disrupt global trade flows. Geopolitics can reset trade flows when global risks intensify through export restrictions to protect domestic food stocks and monetary tightening by central banks can suppress demand but raise global volatility in supply chains.<\/p>\n\n\n\n

Bottomline:<\/strong> Food access and price risks have moved from moderate to accelerated. Food inflation expectations are being revised, higher, and quicker: The United Nation\u2019s Food and Agriculture Organization\u2019s Food Price Index is up 2.4% between February and March 2026<\/a>, with notable pressures in oils, sugar, and grain prices.<\/p>\n\n\n\n

\u2014Lisa Ashton<\/strong><\/p>\n<\/div>\n<\/section>\n\n\n\n

\n
\n

Foreign investors\u2019 Canadian playbook amid the trade war<\/h2>\n\n\n\n

Ottawa is preparing a summit later this year to attract $1 trillion in new investments over five years. The February securities data offers an early read on the foreign investors\u2019 Canadian playbook.<\/p>\n\n\n\n

Global investors are staying in Canada, but repositioning around the trade war. <\/strong>In February, foreign investors put $6.2 billion into Canadian securities, adding to the $106 billion accumulated over the past four months. At the same time, Canadian investors deployed $25.4 billion into foreign securities\u2014the largest outflow since March 2024. While monthly securities data is volatile by nature, the net result was a $19.2 billion outflow from the Canadian economy. The headline, however, understates what is happening. The February data is less a single story than three simultaneous ones\u2014foreign investors distinguishing between Canadian credit and growth, domestic capital chasing U.S. returns, and a market navigating the trade tumult.<\/p>\n\n\n\n

Within equities, the rotation is structural, not random.<\/strong> Foreign capital is rotating hard within Canadian equities\u2014out of energy and manufacturing, into banks. Foreign investors sold $9.2 billion of Canadian equity<\/a> securities in February, even as the benchmark TSX rose 7.6%. At the sector level, credit intermediation and related services absorbed $12.1<\/a> billion in February alone, the largest single-sector inflow in the dataset. Energy and mining shed $9.4 billion<\/a>  the same month, its weakest reading in the past five months. Manufacturing<\/a> has posted outflows in four of the past five months. This pattern isn\u2019t random: foreign allocators are concentrating in assets insulated from trade disruption (e.g. banks) while cutting the ones that aren’t (energy and manufacturing).<\/p>\n\n\n\n

The bond market offers some comfort.<\/strong> Foreign investors added $22.6 billion in Canadian bonds in February<\/a>, including $11.1 billion in corporate bonds, mostly foreign currency bonds issued by Canadian financial corporations\u2014and $8.4 billion<\/a> in federal government bonds. At the same time, they sold $9.2 billion in Canadian equities. It demonstrates foreign investor\u2019s confidence in Canada’s credit, and more caution towards equities.<\/p>\n\n\n\n

\u2014Sydney Wisener<\/strong><\/p>\n<\/div>\n<\/section>\n\n\n\n

\n
\n

The week that was<\/h2>\n\n\n\n

USTR provided<\/a> more CUSMA comments<\/strong><\/p>\n\n\n\n