Key Commodity Nature Risks in the Food and Beverage Sector

Commodities sit at the heart of nature risk in the food and beverage sector. Many of the sector's most material impacts and dependencies are not located in corporate offices or factories, but upstream: in farms, plantations, fisheries, forests, river basins and processing landscapes.

That makes commodity-level visibility essential. The same ingredient can carry very different risks depending on where it is grown, how it is produced, what regulatory regimes apply, and how much traceability a company has into its supply chain. This blog summarises some of the most important nature-related risks for key food and beverage commodities.

Palm oil

Why it matters: Palm oil is used across packaged food, personal care and household products. Although oil palms are cultivated across ~80 nations, global output of palm oil is overwhelmingly dominated by just two: Indonesia and Malaysia. That concentration means regional climate, regulatory or disease shocks can quickly become global supply-chain issues.

Key transition risks: Palm oil is one of the clearest examples of deforestation-linked transition risk. Oil palm expansion has been associated with tropical forest loss, habitat fragmentation and biodiversity impacts, and palm oil is covered by the EU Deforestation Regulation. For food and beverage companies, the commercial risk is not only whether palm oil is technically certified, but whether origin, land-use history and supplier controls can withstand due-diligence scrutiny.

Key physical risks: Oil palm depends on humid tropical conditions, so drought and El Niño-related rainfall deficits can reduce yields and create delayed production effects. Plantations are also exposed to disease risk, especially basal stem rot caused by Ganoderma. Ganoderma spreads through the root system, so can affect whole plantations and leave the soil unsuitable for replanting.

Watch points for food & beverage companies: Prioritise traceability to mill and plantation level, check exposure to high-deforestation-risk sourcing regions, and assess whether disease, drought and replanting risks are reflected in supplier resilience plans.

Sources: IUCN palm oil and biodiversity issues brief; European Commission EUDR guidance; Chong, Dayou and Alexander on Ganoderma in oil palm; Wong, Bong and Idris on Ganoderma species associated with basal stem rot.

Sugar cane and sugar beet

Why it matters: Sugar is widely used in soft drinks, confectionery, bakery, dairy and processed foods. Sugar cane and sugar beet have different production systems, but both can expose companies to water, chemical-use and land-management risks.

Key transition risks: For sugar cane, the main transition risks are water use, land-use change and scrutiny of production in water-stressed or ecologically sensitive regions. For sugar beet, pesticide policy is especially material: restrictions on neonicotinoid seed treatments can reduce available control options for aphid-transmitted virus yellows, creating a direct link between biodiversity-protection policy and crop production risk.

Key physical risks: Water availability is the major cross-cutting risk. Cane is dependent on regular, reliable rainfall or irrigation, while beet yields and sugar content are more affected by the exposure to the extremes. Sugar beets develop entirely underground so too much rainfall can result in them rotting in waterlogged soil, whereas too little can stunt their growth. Pest pressure can also interact with pesticide restrictions, increasing production volatility where growers have fewer viable alternatives.

Watch points for food & beverage companies: Separate cane and beet exposure, identify sourcing from water-stressed basins, and assess whether suppliers have credible pest-management and water-efficiency plans rather than relying on chemical controls alone.

Sources: FAO crop water information on sugarcane; Bonsucro Production Standard; UK pesticide authorisation decisions and coverage on neonicotinoid restrictions; IPCC AR6 WGII food systems chapter.

Soy

Why it matters: Soy enters food and beverage supply chains directly through ingredients such as soy protein, soy oil and lecithin, and indirectly through animal feed in meat and dairy supply chains.

Key transition risks: Soy is highly exposed to deforestation and ecosystem-conversion risk, especially where production is linked to Brazil's Cerrado or Amazon supply sheds. It is covered by the EU Deforestation Regulation, and buyers are under growing pressure to demonstrate plot-level traceability and conversion-free sourcing. Large-scale soy systems can also create exposure to pesticide, herbicide, water-pollution and soil-health concerns.

Key physical risks: Soy yields are sensitive to heat and water stress. Warm, humid regions can also face Asian soybean rust, which can drive yield losses, fungicide dependence and higher production costs. Meanwhile, milder winters are already increasing the presence of pests, such as soybean aphids and stink bugs, which are overwintering more successfully.

Watch points for food & beverage companies: Look beyond direct soy ingredients and map embedded soy in animal-product supply chains. Prioritise sourcing-region traceability, conversion-risk screening and supplier controls on pesticide and soil-management practices.

Sources: European Commission EUDR guidance; Trase Brazilian soy supply-chain resources; Global Canopy Soy Toolkit; UNEP and FAO material on pesticide, fertiliser and soil pollution; CABI resources on Asian soybean rust.

Wheat

Why it matters: Wheat is foundational for bakery, cereals, pasta, snacks and many processed foods. It is also geographically widespread, which can make risk look diversified while still leaving companies exposed to simultaneous environmental shocks across major breadbaskets.

Key transition risks: Wheat's main nature-related transition risk is fertiliser use. Nitrogen fertiliser can contribute to nitrate leaching, eutrophication, groundwater pollution and nitrous oxide emissions. As water-quality, soil-health and climate regulation tightens, fertiliser management becomes a direct supply-chain risk rather than a purely farm-level issue.

Key physical risks: Wheat is highly exposed to heat and drought during sensitive growth stages. Climate change can also increase pest and disease pressure by expanding pest ranges, increasing generations per season and changing humidity conditions that favour fungal pathogens.

Watch points for food & beverage companies: Track sourcing exposure to drought-prone growing regions, ask suppliers about fertiliser efficiency and nutrient runoff, and consider whether procurement strategies are resilient to correlated harvest shocks across multiple regions.

Sources: Carpenter et al. on nitrogen and phosphorus pollution; European Environment Agency water and nutrient pollution resources; IPCC AR6 WGII food systems chapter; FAO and IPPC material on plant pests and food security.

Rice

Why it matters: Rice feeds more than half the world's population and is a major ingredient across ready meals, cereals, snacks, beverages and food-service supply chains. It is also highly dependent on water management, making it sensitive to both too little and too much water.

Key transition risks: Rice is exposed to growing scrutiny around irrigation efficiency, groundwater depletion, basin-level water stewardship and methane emissions from flooded paddy systems. Low-emission and water-saving practices, such as alternate wetting and drying, can reduce some risks but require farmer training, appropriate infrastructure and careful implementation. Rice is also such a core food staple in many countries that when supply is interrupted, governments are willing to take extreme measures. For example, after heavy rains hit domestic rice crops in India in 2023, the Indian government banned exports of non-basmati white rice.

Key physical risks: Rice is vulnerable to heat stress, especially high night-time temperatures and heat during flowering and grain filling. Drought, flooding, storms and salinity intrusion can also disrupt planting, yields and harvest quality.

Watch points for food & beverage companies: Assess exposure to water-stressed rice-growing regions, look for supplier adoption of credible water-management practices, and consider methane and water risk together rather than treating them as separate sustainability issues.

Sources: IRRI and CGIAR guidance on alternate wetting and drying; Sustainable Rice Platform Standard; IPCC AR6 WGII food systems chapter; peer-reviewed studies on rice heat stress and methane mitigation.

Coffee

Why it matters: Coffee is a high-value commodity with a large smallholder base. For food and beverage companies, the risk is not only volume availability but quality, farmer resilience and the long-term suitability of existing sourcing regions.

Key transition risks: Coffee is covered by the EU Deforestation Regulation, creating a traceability and compliance risk for companies that cannot show where beans were produced and whether production is deforestation-free. This is particularly challenging in smallholder-heavy supply chains where geolocation and farm-boundary data can be difficult to collect at scale.

Key physical risks: Arabica coffee is highly climate-sensitive and these strict requirements are already forcing plantations further upslope to higher altitudes in search of cooler conditions. This introduces new physical risks: available mountainous land is finite, and steeper slopes drastically increase the risk of soil erosion and landslides. Scientific studies project major reductions in suitable growing area by mid-century under climate change, while coffee leaf rust can reduce yield and quality and may become harder to manage as temperature and humidity patterns shift.

Watch points for food & beverage companies: Prioritise farm-level traceability, assess climate suitability in current sourcing regions, and evaluate whether suppliers are investing in disease management, shade systems, farmer support and climate-resilient varieties.

Sources: European Commission EUDR guidance; Grüter et al. (2022) on future suitability for coffee; CABI resources on coffee leaf rust; World Coffee Research resources on coffee climate resilience.

Cocoa

Why it matters: Cocoa supply is heavily concentrated in Côte d'Ivoire and Ghana, where millions of smallholders depend on cocoa income. That concentration makes chocolate and confectionery supply chains particularly exposed to regional land-use, climate and farmer-livelihood risks.

Key transition risks: Cocoa is highly exposed to deforestation risk and is covered by the EU Deforestation Regulation. Satellite-based research has found cocoa cultivation to be an underlying driver of forest loss in protected areas in Côte d'Ivoire and Ghana, making traceability, farm-boundary data and land-use compliance central for buyers.

Key physical risks: Cocoa is sensitive to rainfall, humidity and temperature, so longer dry seasons and higher heat can reduce yields and increase tree stress. Cocoa is also vulnerable to pests and diseases such as black pod and cacao swollen shoot disease, while soil nutrient depletion can push farmers to expand into new land rather than maintain yields on existing farms.

Watch points for food & beverage companies: Focus on farm-level traceability, deforestation monitoring, farmer income resilience, agroforestry potential and disease-management support. For cocoa, social and nature risks are tightly linked: low farm incomes can undermine the ability to invest in sustainable land management.

Sources: Kalischek et al. satellite-based cocoa mapping for Côte d'Ivoire and Ghana; Ploetz on cacao diseases; IPCC AR6 WGII food systems chapter; climate-suitability work on cocoa in West Africa.

The takeaway

For food and beverage companies, commodity risk is nature risk in its most practical form. The highest-priority risks will vary by sourcing geography, supplier practices and traceability depth, but the pattern is clear: deforestation, water stress, soil degradation, chemical use, pests, disease and climate suitability are increasingly commercial issues, not just sustainability issues.

The companies best placed to respond will be those that can connect commodity sourcing to location-specific nature intelligence: where commodities are produced, what ecosystems and water basins they depend on, what pressures they create, and how those risks could affect supply availability, cost, quality, compliance and resilience.