You’re probably thinking, “Agriculture stocks? Is it even possible to make money in this market?” But, believe it or not, the top agriculture equities outperform the overall market.
Agriculture is the sector that harvests and distributes agricultural products such as grains, livestock, sugar beets, and soybeans. Other businesses in the industry produce fertilizers, prepared meals, and farm equipment.
In reality, the S&P GSCI Agriculture Index, a popular indicator for agricultural markets, has outpaced the S&P 500 in 2019. Furthermore, food costs are increasing in L.A. due to bottlenecks strangling supply chains.
Commodity shares are attracting a flood of money, anticipating higher inflation. Oil and gas stocks are seeing robust demand. The agriculture industry, mainly farming industries, deserves attention since food is a necessary element of life.
Best Value Agriculture Stocks
Investors may invest smarter in agricultural industry companies that provide fertilizers, pesticides, seeds, processing, and livestock. There are also a few developing markets to consider. In addition, many agricultural goods are consumer staples, which means that the rest of the economy doesn’t influence their net sales.
Intrepid Potash Inc.:
Intrepid Potash is a mineral firm that explores for and sells potassium, magnesium, salt, sulfur, and other minerals to businesses in the agricultural sector, animal feed industry, and oil and gas. Its facilities are located in the United States. Intrepid Potash Co. released results for the fourth quarter of 2021 on March 7, which closed on December 31. Intrepid Potash recorded a net income of $223.9 million in that period, compared to a net loss of $162 million one year prior. YOY sales increased by 48.3 percent. The company’s net income was significantly helped by releasing a valuation allowance for its deferred tax assets.
Bunge is a major agricultural firm interested in sugar, wheat, and. It delivers and transports major crops such as sugar ethanol, wheat, and corn worldwide. The firm also handles oilseeds and grains, as well as fertilizers.
Tyson Foods Inc.:
Tyson Foods is a food business that produces frozen and refrigerated beef, pork, chicken, and other protein meals. In addition, breeding stock, contract farmers, feed production, processing, marketing, and transportation are among the company’s operations. On February 11, 2018, Tyson Foods announced a sure quarterly dividend of $0.46 per share of Class A common stock and $0.414 per share of Class B. Both payments will be made on June 15, 2022, to shareholders of record as of June 1, 2022.
Fastest Growing Agriculture Stocks
According to a growth model, these are the top agriculture stocks that assign a 50/50 split to companies’ most recent quarterly percent revenue growth and earnings rise. The importance of sales and profits to a firm’s success cannot be overstated. As a result, comparing companies solely based on one growth indicator is akin to rating them according to the accounting anomalies of that quarter (such as tax law changes or cost of downsizing), which might render one or the other figure unrepresentative of the business in general.
C.F. Industries Holdings Inc.:
C.F. Industries processes hydrogen and nitrogen chemicals to reduce agricultural, energy, and air pollution. It has factories in the United States, Canada, and the United Kingdom. For Q4 2021, it reported earnings of $2.35 per diluted share. In the fourth quarter of 2018, C.F. Industries’ net income from common shareholders rose eight times, owing to a double increase in sales. Significant increases in average selling prices and worldwide demand helped to propel growth.
Verde AgriTech PLC:
British agri-tech firm Verde AgriTech PLC is a firm that acquires and develops mineral resource assets to produce multi-nutrient fertilizers. The firm is focused on a potash mine in Brazil. In March, the firm gave an update on its production targets, stating that its second facility will begin operations during the second half of this year. In 2022, the company expects to be Brazil’s leading potash producer.
Nutrien Ltd. is a Canadian corporation that produces crop input products and services. Potash, nitrogen, and phosphate are some of the retail agriculture solutions it offers. Services are provided through farm centers in North and South America and Australia. Nutrien also trades in Canada using the ticker NTR.TO.
Agriculture Stocks with the Most Momentum
The total return for the agricultural sector over the last year was the greatest among these.
Verde AgriTech PLC:
A British agriculture-technology firm, Verde AgriTech PLC, was founded. It acquires and develops mineral resource assets to manufacture multi-nutrient fertilizers. The firm has set its sights on a Brazilian potash mine. In early March, the company provided an update on its production goals, claiming that its second plant would start producing in the second half of this year.
CVR Partners L.P.:
CVR Partners is a limited partnership founded by CVR Energy Inc. It manufactures, markets, and distributes nitrogen fertilizers and related goods. Its manufacturing operations are located in Kansas and Illinois.
Itafos is a Canadian-based phosphate and specialty fertilizer companies manufacturer listed on the NASDAQ. It runs phosphate fertilizer factories, phosphate mines, and other mine and extraction operations.
2 Trends Pushing Agriculture Stocks to New Highs
Inflation Pushes Agriculture Stocks Higher –
Inflation has increased in the short term but appears to be leveling off. However, the CPI’s food index is still growing.
The U.S. dollar is bolstered by government spending and quantitative easing by central banks worldwide, aiding in weakening it and boosting commodity prices.
If you have cash, your purchasing power is declining. To compensate for this loss, you may invest in inflation-proof firms that can pass on their growing expenses to consumers. And while food production might be a necessity regardless of the rest of the market’s condition, there are more things we could do with it.
Population Growth and Food Demand –
The globe’s population has increased by almost 300% during the last century. This implies more people to feed. As a result, agricultural stockpiles continue to rise.
Finally, more people worldwide are moving into the middle class. As a result, they have more lavish discretionary spending and can purchase higher-end items. Meat consumption in China, for example, has risen to new heights.
Raising chickens, pigs, and cattle all necessitate more grains. To keep up with rising demand – and remain competitive – ag businesses are becoming increasingly technologically sophisticated and efficient.
Agriculture has gotten a boost from increasing agricultural commodity prices, boosting farm revenue, and encouraging farmers to buy equipment, crop prices, and crop inputs. In addition, the necessity to feed crops, restore soil nutrients after a harvest, and increase yields supports the bullish case for fertilizers.
Is investing in agriculture a good investment?
Agriculture returns are typically entirely consistent over time, and from a fund standpoint, they’re an excellent way to diversify your risk. It also provides a higher return than you’d get from a bond or a cash investment with current interest rates.
What is the best agriculture ETF?
For Q3 2022, the following agricultural commodity ETFs are in the top three: WGST, RJA, and CORN. Since 2016, Nathan Reiff has been writing expert articles and news on Investopedia about financial issues such as investing and trading, cryptocurrency, ETFs, and alternative investment opportunities.
How can I invest in agriculture?
- Purchasing Farmland Directly
The most straightforward solution when choosing whether or not to purchase farmland is to buy it immediately. Because of the significant investment or mortgage needed, this approach requires millions of dollars in assets or a loan to cover the land costs. Even if you are not a farmer, direct ownership of agricultural land may provide significant profits.
Many farmers do not farm on their land. According to the USDA, over half of all farmland is being leased.
Farmers can also rent land from landowners and farm it themselves. These leases generally last several years, and the farmer pays for more than the mortgage rate for the lease.
In this contract, the farmer leases the land for a more extended period than the mortgage payments. In this manner, the landowner may pay their mortgage while still farming since they don’t have to pay total rent. A farmer may produce money through agriculture without borrowing the funds to acquire the property.
- Real Estate Investment Trusts
Purchasing a farm outright might be very expensive, and many costs come with farming. Seed and supplies, machinery such as tractor supply, paying for labor, and more are some of the associated fees.
Another approach is to invest in farmland REITs (Real Estate Investment Trust) (see Farmland REITs). A REIT, as the name suggests, is a firm made up of reputable investors that purchases a farm portfolio and then leases it to farmers. Farmland Partners Inc. (FPI) and Gladstone Land Corporation (LAND) are two of the most well-known real estate investment trusts.
- Purchase Stocks
Another alternative is to invest in agricultural companies’ stocks. These equities assist farming operations like fertilizers and seeds, equipment, and distribution and processing. Several publicly listed businesses and investors invest in agriculture stocks listed on these farming sector firms.
- Mutual Funds & Exchange Traded Funds (ETFs)
The final choice is to look into mutual and exchange-traded funds (ETFs). If you want to invest in stocks but aren’t sure which ones will deliver the best returns, consider investing in a farming-focused mutual fund or ETF. Another option is ETFs those track agricultural commodities, such as the Invesco DBA Agriculture Fund (DBA) or iShares Global Agriculture Index ETF (COW).
These firms acquire shares of the stock picks above, such as Deere & Co. or Monsanto, and combine them into a fund designed to mirror the agriculture industry’s growth. Investors can then purchase shares in the fund. As a result, these mutual funds have a moderate degree of risk and provide mediocre returns.
It’s worth noting that mutual funds and ETFs generally have fees. So before investing in a mutual fund or ETF, consider any associated expenses.
Just Start Investing is a personal finance website that makes investing easy. Learn the simple strategies to start investing today, as well as ways to optimize your credit cards, banking, and budget. Just Start Investing has been featured on Business Insider, Forbes, and US News & World Report, among other major publications for its easy-to-follow writing.