When most people think of hi-tech, farming doesn’t usually come to mind. But advanced technology is transforming today’s farm sector from seed to harvest, which has never been more important than now.
Global food security is becoming more of a concern in light of several recent events—including the Indian farmers’ protests, a wage strike among Argentine soybeans farmers, a pork and corn shortage in China and bird flu cases in British poultry as well as reduced grain supplies from Ukraine and fertilizer exports from Russia. Consequently, agriculture is garnering lots of attention from investors these days. And with the U.S. dollar still below historical norms despite a recent uptick, U.S. farm commodity prices are likely to continue rising for the foreseeable future.
After years of enduring oversupplies and falling prices, America’s farmers are rejoicing as grain and oilseed prices have been on a tear. In the last year, for instance, soybean futures prices increased by roughly 30%, while corn prices have more than doubled since an August 2020 bottom. For corn, the recent uptick comes on the heels of a huge 2020 rise – its best yearly performance in eight years. Soybean prices, meanwhile, had their best showing since 2016 in 2020.
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What’s more, ag commodity analysts forecast the stellar recent performance in the grains and oilseeds to continue in 2022. Soybean prices are soaring as the export outlook improves on “robust” demand from top buyer China.
So, with crop prices on the upswing, the companies that cater to agriculture (including equipment makers, seed providers and fertilizer producers) are also outperforming. That said, let’s take a look at some of the more promising companies in this sector.
The 4 Best Agriculture Stocks
Best Agriculture Stock #1: Deere & Company (DE)
Deere (DE) is a leading equipment provider and makes tractors, lawn mowers, construction and harvesting machinery—easily recognized by their distinctive green and yellow livery. The firm is divided into two major segments (ag and construction), and while shutdowns have impacted the latter, its Ag & Turf business has impressively weathered the pandemic.
Much of its focus is on tech-enabled “precision farming,” which enables growers to monitor fields and apply crop protection and nutrients in exactly the right amounts based on satellite-generated data. Precision farming has been widely adopted in major growing regions like Europe, South America and China. Also supportive is the recent phase 1 trade deal with China (projected to further boost U.S. grain and oilseed crop sales).
The firm is seeing increased farm equipment sales, and analysts foresee 18% sales growth and 17% earnings per share growth this year. And DE stock has performed well, up 10% in 2022 despite major market headwinds.
Best Agriculture Stock #2: AGCO Corp. (AGCO)
Along those lines, companies that make agricultural planting and harvesting equipment are expected to grow at a 9% annual clip until 2025. AGCO Corp. (AGCO) is the world’s largest manufacturer of machinery and equipment focused solely on the ag industry, and its tractors and combine harvesters are widely used by farmers globally.
Through its subsidiaries, AGCO serves nearly all major facets of food production, and several major farm machine makers operate under its umbrella, including Challenger, Fendt and Massey Ferguson.
North American retail tractor sales increased in 2020, and the company reported a strong order book for tractors in North and South America and Europe. The company reported 20% sales growth in 2021, and with global food demand on the rise, the firm has a huge potential growth runway.
Best Agriculture Stock #3: Mosaic (MOS)
Fertilizer companies aren’t always the hottest names on Wall Street, but their products are in high demand and are vital for ensuring an abundant food supply. The industry is garnering attention after top-consumer China’s corn shortage (due to weather-related issues and covid lockdowns) and its recent vow to increase its agricultural imports from the U.S.
This is good news for Mosaic (MOS), the largest producer of phosphate and potash fertilizers in the U.S. Both inputs are essential for all major crops (the potash is mined in Canada and New Mexico, while the phosphate is mined in Florida, with additional facilities in Brazil).
Mosaic has reported higher fertilizer demand from farmers in Brazil (which had an excellent 2020) and sees a big opportunity for capacity additions in that country. Moreover, phosphate prices are rebounding, and rising ag commodity prices – especially soybeans – should boost the firm’s profit outlook via higher input demand and create plenty of growth opportunities for Mosaic going forward.
Wall Street has definitely taken notice of late. The stock is up 77% in the last year and 60% YTD despite a significant recent selloff. This mini-dip looks like a buying opportunity.
Best Agriculture Stock #4: Nutrien Ltd. (NTR)
Nutrien Ltd. (NTR) is the largest producer of potash and the third largest producer of nitrogen in the world. Both are essential fertilizers for the world’s major crops and have been in high demand among U.S. growers this year.
The company’s potash segment is seeing higher prices per ton and achieving improved sales volumes this year as global potash shipments are on track to reach 10-year highs. Analysts also anticipate higher cash flows this year (due to higher nitrogen prices), along with a stable quarterly cash dividend of $0.48 per share (current yield 1.9%). The firm is solidly managed and stands to benefit from the long-term rebound in worldwide fertilizer consumption rates.
As for NTR stock, it looks great, up 79% in the last year (and 32% YTD) despite a pullback this month.
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Clif Droke is Chief Analyst of Cabot SX Gold & Metals. For over 20 years, he has worked as a writer, analyst and editor of several market-oriented advisory services and has written several books on technical trading in the stock market, including “Channel Buster: How to Trade the Most Profitable Chart Pattern” and “The Stock Market Cycles.”Learn More
*This post has been updated from an original version, published in 2020.