Agrifood sector risk report

Resilience tested by climate, inflationary pressures and geopolitics

MEDIUM RISK FOR ENTERPRISES

Last Update: July 2025

Strengths & Weaknesses

Growing demand, especially in emerging and middle-income countries
Despite inflation and cost pressures, pricing power remains intact
Technology tailwind supports both productivity and demand through new products

Climate disruptions and related extreme weather events are triggering disruptions and price volatility
From fertilizers to logistics, input cost pressures are still strong
Supply-chain vulnerability is high: beyond climate and geopolitics, the sector is also vulnerable to policy (trade barriers, regulations etc.) and diseases (e.g. bird flu outbreaks)

Sector Overview

What to watch ?

Policies & trade: Food security and trade policies are back on the forefront of most countries’ agendas. Domestic subsidies, export curbs, trade deals (e.g. UE – Mercosur) and key legislation (e.g. US Farm bill etc.) introduce new compliance costs, market dynamics and trade patterns.
Workforce: Labor shortages persist in key farming regions due to urban migration and aging demographics. In the US and other countries that have been enacting stricter immigration policies, labor markets are likely to experience significant tensions. Filling these gaps in the short term is critical challenge for the sector as deployment of automation and technology is likely to take a few years.
Supply-chain diversification: Post-Covid and Ukraine supply disruptions have accelerated the shift from lean, single source models toward diversified regional networks and nearshoring. Companies are building buffer capacity and multi-supplier platforms, and leveraging predictive analytics to ensure continuity. This increases resilience but might also pressure margins.

The agrifood sector remains fundamentally robust, driven by demand and pricing power resilience. The global agrifood system produces nearly 11bn tonnes of food annually and employs about 1.2bn people worldwide. The global market is expected to grow at around +7% CAGR over 2025-2030 and is expected to reach about over USD21trn by 2030 for agriculture alone while the food and beverage processing could reach another USD10trn. Commodity price dynamics offer a mixed picture as food price indices are higher in 2025 than in 2024 but remains below the 2022 peak. Cereal prices are consolidating due to strong output: global cereal production is projected to hit a record 2.925bn tons in 2025, with maize and rice supplies especially robust, while meat and dairy prices remain elevated, with the meat price index at record highs.
Despite elevated costs in energy, logistics and fertilizers, agrifood firms kept gross margins around 30% in 2024, with revenues and earnings expected to remain steady through 2025. Food processing manufacturers are benefiting from lasting pricing power, and the beverage segment continues to record revenue growth of about +10%, although downstream inflation is squeezing net margins.

Beyond core agriculture, agrifood technology continues to scale meaningfully. The smart agriculture market was valued at USD25.4bn in 2024, with projections to grow at over +10% over the coming years. Similarly, the overall agrifood technology market (including hardware, ICT, biotech) is expected to expand by about +8% per year over the next five years. The adoption of IoT, AI, drones, robotics and blockchain is reshaping efficiency, traceability and yield optimization across the supply chain.

Overall, the agrifood sector is in robust health. Abundant harvests are keeping staple prices in check, even as meat and dairy stay high. Firm consumer demand enables companies to sustain profitability despite cost pressures. Meanwhile, strong investment in digital and precision technologies is enhancing long-term resilience and productivity. But the sector faces ongoing risk from extreme weather, geopolitical disruptions and input inflation. Success in the next five years will hinge on investing in innovation and building counter-cyclical supply chains.

Subsectors

Upstream: This includes growers and producers of foundational agricultural goods (i.e. cereals, oilseeds, fresh fruits, vegetables, livestock and aquaculture).
Downstream food manufacturing: Firms in this segment convert raw agricultural commodities and animal products into edible, packaged goods. Their operations span processing, packaging, logistics, transformation and retail-ready products.
Beverages: Encompassing both non-alcoholic (juice, soda, coffee, tea, bottled water) and alcoholic (beers, wines, spirits) categories.
Agri tech & biotech: A segment that cuts across all upstream and downstream segments, leveraging frontier science and digital innovation such as synthetic biology & microbial inputs, nano material sensors and smart packaging and cultured & alternative proteins.

Contacts

Ano Kuhanathan

Head of Corporate Research

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