When researching agricultural companies, it cannot be easy to see the big picture because there are many types of farming companies. You might consider buying companies specializing in fertilizers, seeds, agricultural chemicals, livestock feed, animal foods, ethanol, dairy products, poultry, eggs, beef, pork, or poultry.
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Agricultural Stocks to Buy
There are a lot of companies that sell agriculture stocks. You can start by looking at companies known for making great products and having a lot of brand value. It’s also good if they have been around for a long time.
Scotts Miracle-Gro (NYSE: SMG)
Scotts Miracle-Gro [SMG] has a big advantage over other companies: its brand value. People know it makes lawn and garden products, which it produces and sells. Suppose you want to buy fertilizers, grass seed products, outdoor cleaners, or disease-control products. In that case, Scotts Miracle-Gro [SMG] is an excellent place to start.
Gardeners know they can trust Scotts for gardening products, plant foods, garden soil, and potting mixes. Scotts has embraced the trend toward organic products with a lineup of offerings.
Scotts is a very successful company. They have a lot of different products and services that make them money. People might not know that they are buying Scott’s product. Still, they probably are because Scotts have so many famous brands like OxiClean, Grub-Ex, Tomcat, Roundup, SuperSoil, Earthgro, PatchMaster, and more.
Scotts Miracle-Gro sells to many businesses, like hardware stores, warehouse clubs, and home centers. It also has a direct sales force that goes after hydroponic distributors and retailers. Another good thing about Scotts is that it offers a dividend (a payment to shareholders) that is more than 2%.
CF Industries (NYSE: CF)
CF Industries is a company that makes fertilizer, including products like ammonia, urea, ammonium nitrate, and ammonium nitrate.
Like Scotts Miracle-Gro, CF Industries has multiple revenue sources, including diesel exhaust fluid, nitric acid, and aqua ammonia.
CF Industries sells to many different customers, including farmers, industrial users, fertilizer distributors who are not part of a company, and cooperatives. CF Industries is less risky because it has multiple revenue streams. And like SMG, CF Industries has been around for a long time.
Investors who are looking for income can find a good return from SMGs. The company offers a dividend of 2.75% (as of the time this article was written). You could also make more money by selling call options against your shares and creating covered call strategies.
The PowerShares DB Agriculture ETF is a high-liquidity ETF issued by Invesco. This fund is a key consideration for investors looking to trade ETFs.
The agriculture ETF aims to mirror the returns of the Diversified Agriculture Index Excess Return (DBIQ). This ETF invests in futures contracts on agricultural commodities, which helps to keep liquidity high.
Another agricultural ETF worth looking into is the iPath Bloomberg Grains Total Return ETN. It has a lower expense ratio than the PowerShares DB Agriculture ETF. It has performed better this year by a wide margin.
However, the past ten years have not been good for most agriculture exchange-traded funds. It is likely because of the current macroeconomic climate. However, commodities usually do not stay depressed for multiple decades. It may mean that the next ten years will be better for returns.
Agriculture Stocks List
Investing in agricultural stocks is because the global population continues to grow and demand more protein. It means that we need more livestock feed, fertilizers, and seeds. However, crops are affected by climate change. It becomes increasingly difficult to farm arable land if the temperature becomes too hot or cold.
The companies that will do the best in the future are the ones that have a good balance sheet, plenty of cash, and good growth opportunities.
Here is a list of agriculture stocks with some of the biggest and most successful companies.
- Mosaic [MOS] – fertilizers
- Tyson Foods [TSN] – poultry, pork, beef
- Pilgrim’s Pride [PPC] – poultry
- Cal-Maine Foods [CALM] – eggs
- Archer Daniels Midland [ADM] – livestock, ethanol, food
- Nutrien [NTR] – fertilizers
Investing in Agriculture Stocks
The spiraling cost of living has been one of the most talked-about topics of the past year. It is when the prices of goods go up a lot in a short period. The most recent data shows that the rate of inflation was 8.6% in the U.S. This is the highest since 1981.
Many investors think that the inflation we are seeing now is a good thing because it means that there are good opportunities in the energy sector. It is especially true for stocks in the “Big Oil” industry. However, we have seen this trend in the agricultural sector as well. Prices for food items in grocery stores have increased, and our portfolios also reflect this trend.
The seven investments listed below are a method to profit from rising agricultural commodity prices. But they are also suitable long-term investments for investors who want some agriculture exposure or are looking for low-risk dividend trades.
Nutrien Ltd. (NTR)
Nutrition is a vast agricultural company. It is one of the largest companies on the planet that focuses only on agriculture. Nutrien makes fertilizer and pesticides for farmers.
NTR has many products, including potash, nitrogen, phosphate, sulfate products, seeds, and other farming merchandise. It operates in the U.S., Canada, South America, and Australia.
Nutrition was created in 2018 due to the merger of two existing companies. Nutrien is a specialist chemical company with many scales, so it’s hard for other companies to compete. It has led to their stock (NTR) increasing by more than 10% in 2022 as of June 17. Their business is reliable, and they continue to benefit from the current “commodity supercycle” lifting agricultural producers.
Bunge Ltd. (B.G.)
Bunge is one of the world’s largest agribusiness processors. It buys grains, oilseeds, and other products from farmers. The logistics division of Bunge is responsible for the warehousing and distribution of these products worldwide. Next, it processes these products into material that is more appropriate for people who use them commercially. Finally, it packages these commodities and sells them to both corporations and individuals.
Bunge was founded over 200 years ago in Amsterdam and is currently headquartered in St. Louis. Even during difficult periods such as the 2008 financial crisis and more recent pandemic-related interruptions, dividends have been paid to shareholders for a long time by the firm.
B.G. is not as good as some of the other investments on this list, but it still has returns of 5% year to date in 2022. B.G.’s front-to-back agricultural business model, deep relationships, and global scale make it a very durable option. Plus, B.G. stock pays out about 2.5% in extra returns over the share price.
Archer-Daniels-Midland Co. (ADM)
Another big agricultural company is ADM. It is multinational and provides plant-based things for food, animal feed, and industrial solutions. ADM is doing well this year, with a growth in revenue of about 12%. Its stock price has gone up 14% this year, but the rest of the stock market has not been doing as well.
Archer-Daniels-Midland is a company that is known for being in the agriculture industry. This company has been around for a long time and has always been successful. Even during tough times, this company still does well. They offer their shareholders a 2.0% yield and have increased their payouts by 130% in 10 years.
Corteva Inc. (CTVA)
Corteva is a company that some people might not know about. It was created when Dow-DuPont split into two companies. The Corteva company makes things like food and other products for plants. It’s been there for a while and makes much money for its owners.
Next fiscal year, Corteva is expected to make almost $18 billion. It will be thanks to the company’s thriving seed and herbicide businesses. These two businesses are related because the company’s branded seeds have “trait technologies” that make them resistant to weather, disease, insects, and herbicides. These “crop protection” products can be applied without affecting yield.
Corteva is a company that helps farmers all around the world. They work in the United States, Canada, Latin America, the Asia Pacific, Europe, and the Middle East. This wide reach means they can stay stable when other stocks are doing poorly during tough times. As of right now, their stock has gone up about 13% this year.
VanEck Agribusiness ETF (MOO)
MOO is a type of ETF that invests in agricultural companies. It was created in 2007 and had nearly $2 billion in assets. Investors often use it because it offers diversified exposure to the farm market. Plus, its ticker symbol is pretty clever!
This ETF invests in companies that make most of their money from chemicals used in agriculture, animal health products, irrigation equipment, and farm machinery. The ETF’s top holdings include:
- Bayer AG (a large chemical company).
- Deere & Co. (a famous tractor manufacturer).
- Zoetis Inc. (a prominent provider of animal and livestock health care).
Though MOO is down a little this year, it has done better than most other funds because of its focus on the agricultural sector. Plus, the exchange-traded fund pays out about 1.3% in dividends, slightly less than the average large-cap stock in the S&P.
Invesco D.B. Agriculture Fund (DBA)
Consider this Invesco fund if you’re seeking a way to invest in agricultural commodities instead of public companies that service the industry. It has more than $2 billion in assets. It tries to track changes in an index of the most heavily traded agricultural commodity futures. That includes wheat, corn, soybeans, and sugar, among the top positions.
Many investors have turned to commodity futures because of inflation in the last year or two. However, few people know about the futures market or are willing to research the different contracts and expiration dates. DBA is not very cheap, with an expense ratio of 0.93% annually. Still, it does take some of the guesswork out of this investment because you can trade this fund using a regular brokerage account without any per-contract fees on ag futures.
The DBA fund is structured as a limited partnership to make it easier for shareholders to avoid paying federal income taxes. The fund will pass along its annual income and returns to shareholders, who will then have to deal with a complicated tax form called a K-1.
This agriculture fund is up more than 10% on the year through June 17. The typical large-cap stocks have moved in the opposite direction.
Teucrium Wheat Fund (WEAT)
WEAT is a fund that focuses on wheat futures. Investors should gain exposure to wheat prices without investing in other agricultural commodities.
The fund is made up of three different types of wheat. It gives you a while to avoid short-term price volatility but make money off the medium-term upside in agricultural commodities. Wheat is a good choice because it has high liquidity, and there is a large ETF that tracks its price.
Wheat is in high demand everywhere in the world for various reasons. People use it for food, animal feed, and unique products like particleboard and plastic. The agriculture ETF has done very well this year, so what might be a good investment compared to other options?
Frequently Asked Questions About Agricultural Stocks
Farmland is a good investment in an inflationary environment. Between 1992 and 2020, farmland provided average annual returns of nearly 11%, including income and price appreciation.
An investor can invest in a farming-focused real estate investment trust (REIT) to come close to owning a farm. It includes Farmland Partners Inc. (FPI) and Gladstone Land Corporation (LAND). These REITs typically purchase farmland and then lease it to farmers.
One way to invest in farmland is to purchase usable cropland or pastureland and rent it out to a farmer or rancher. This method of investing in farming has a significant upfront cost, as the investor would need to purchase a large plot of land.
With $1.6 billion in assets under management, the Invesco D.B. Agriculture Fund (DBA) is a significant farmland ETF. DBA gives you access to agricultural commodities. The investors invest in a wide range of agricultural and natural resources.
Stock farming is raising animals for meat, milk, or wool on a farm. An example of stock farming has a goat and sheep farm.