ASX food stocks are riding the investment wave up, but China trade tensions are beginning to hit

ASX food stocks have gained 38 per cent on average in the past six months, making it one of the sectors to ride out the COVID-19 downturn.

New Zealand Coastal Seafood (ASX:NZS), for example, is up over 400 per cent in 2020. It exports fish bladder (specifically ling maw) to Asian markets, where it is considered a delicacy.

Stocks surging off success closer to home include Maggie Beer Holdings (ASX:MBH), wine selling platform Digital Wine Ventures (ASX:DW8) and diversified Tasmanian company Pure Foods Tasmania (ASX:PFT).

The latter rose from the ashes of Bunji Corporation in late April and is well above the 20c price the reverse takeover was conducted at.

Here’s a list of ASX food stocks and their six-month performance:

China trade tensions escalating

While many stocks have seen demand remain stable (if not improve) despite COVID-19, Australia’s trade relationship with China is throwing up a few hurdles.

For many ASX-listed food stocks and many Australian private companies, China is the key export market.

“We haven’t been this exposed to one market since the 1950s, when we were still joined at the hip to the UK. And that was a very different political relationship,” Rabobank head of food & agribusiness research Tim Hunt said.

But trade tensions are now impacting food exports.

Already this year China has imposed a tariff on Australian barley as well as withdrawn accreditations from certain abattoirs. Most ASX stocks have been unaffected by these measures.

But earlier this week China launched an anti-dumping investigation into the Australian wine industry.

Large cap Treasury Wines Estates (ASX:TWE), which could be affected by this,  slid 14 per cent yesterday.

Don’t put all your eggs in one basket

Hunt said there were other export opportunities for Australian companies, and it was better to supply to multiple markets than bank on just one.

“We are hopeful for the prospects of a Free Trade Agreement with the UK and EU which is taking place as Brexit occurs,” he told Stockhead.

“And we’re surrounded by heavily populated and increasingly wealthy countries in South East Asia as well. So there are other markets for us.

“That said, there’s only one China and there will only ever be one China in the history of Australian agriculture and so it’s hard to repeat the story that we’ve seen in that market.”