The agriculture sector is an evergreen sector of the economy. The world will always need food, and the companies in this sector help ensure the world is fed. In fact, agriculture stocks are typically considered to be in the same category as consumer staples because demand remains constant no matter what is happening in the broader economy.
This is also a diverse sector. And that can get confusing for investors. Investors can buy into pure-play companies that make fertilizer and pesticides. You can choose to look at companies such as Deere & Company (NYSE:DE) that supply the equipment that many farms use.
And as interest in sustainable agriculture is growing, so is this sub-sector which creates another path for investors, particularly those who are focused on ESG (environmental, social, and corporate governance) concerns.
This presentation highlights seven agricultural stocks that offer investors different ways to play the sector.
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- Archer Daniels-Midland
- Corteva
- Nutrien
- CF Industries
- Mosaic
- Agco
- Farmland Partners
#1 - Archer Daniels-Midland (NYSE:ADM)
The first agricultural stock to consider is Archer Daniels-Midland (NYSE:ADM). This is a large-cap, blue chip company that is central to the world’s food supply. The diversified nature of the company’s business gives it many avenues to drive revenue and earnings.
And growing revenue and earnings is the catalyst for growth-oriented investors. The company has beaten earnings expectations for the past three quarters and has beaten revenue for seven consecutive quarters. As of September 28, 2022, ADM stock was up 22.9% in 2022. This is large because the company benefits from rising commodity prices. And with inflation likely to remain elevated for some time, the company has a long runway for further growth.
However, value investors shouldn’t ignore the dividend. As of this writing, Archer Daniels-Midland has raised its dividend for 49 consecutive years. That puts it on the cusp of being a Dividend King. This is an exclusive designation reserved for companies that have increased their dividend for over 50 years.
About Archer-Daniels-Midland
Archer-Daniels-Midland Company engages in the procurement, transportation, storage, processing, and merchandising of agricultural commodities, ingredients, flavors, and solutions in the United States, Switzerland, the Cayman Islands, Brazil, Mexico, Canada, the United Kingdom, and internationally. It operates in three segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition.
Read More - Current Price
- $53.53
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 13 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $62.83 (17.4% Upside)
#2 - Corteva (NYSE:CTVA)
Corteva (NYSE:CTVA) brings a taste of the tech sector to agriculture. The company is engaged in the emerging area of agriscience. Generally speaking, Corteva is providing farmers with digital farm-management systems that give them access to the data they need to efficiently manage their crops for the highest yield.
The company currently has a P/E ratio of over 24x. That’s high for the sector, but perhaps investors can look past it as part of a “tech premium.” It will be easier for investors to ignore if the company hits estimates for double-digit earnings growth in the next five years.
To that end, in the company’s most recent earnings report, it reported that new product sales exceeded $1 billion for the first half of the year. That was a year-over-year increase of over 60%.
About Corteva
Corteva, Inc operates in the agriculture business. It operates through two segments, Seed and Crop Protection. The Seed segment develops and supplies advanced germplasm and traits that produce optimum yield for farms. It offers trait technologies that enhance resistance to weather, disease, insects, and herbicides used to control weeds, as well as food and nutritional characteristics.
Read More - Current Price
- $58.77
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 15 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $63.89 (8.7% Upside)
#3 - Nutrien (NYSE:NTR)
Next on this list of agricultural stocks to buy is Nutrien (NYSE:NTR). The company offers many of the products that are used in farming. But it’s one, in particular, that may be particularly relevant to investors in the coming quarters. The company produces potash. Ukraine is one of the leading suppliers of potash. But that supply has largely been offline since the Russian invasion.
While the company doesn’t have the market cornered on potash, it is the world’s largest producer of potash. That may explain the company’s exceptional performance thus far in 2022. The second quarter is typically the company’s best in terms of revenue. And this year was no exception, with the company posting a record $14.51 billion, a 48% increase from the prior year.
NTR stock is up 15% while the markets are at bear market lows. Nutrien also has a P/E ratio of 7x earnings and a tasty dividend that pays out $1.92 on an annual basis which currently calculates to a 2.21% dividend yield.
About Nutrien
Nutrien Ltd. provides crop inputs and services. The company operates through four segments: Retail, Potash, Nitrogen, and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seeds, and merchandise products. The Potash segment provides granular and standard potash products.
Read More - Current Price
- $45.91
- Consensus Rating
- Hold
- Ratings Breakdown
- 10 Buy Ratings, 6 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $60.33 (31.4% Upside)
#4 - CF Industries (NYSE:CF)
If you’re an investor who is focused on the idea of sustainable agriculture, CF industries (NYSE:CF) is one to look at. The company is staked in the clean energy sector and manufactures and sells nitrogen and hydrogen products, including fertilizers used in agriculture. In fact, the company is one of the leading global suppliers of nitrogenous fertilizer and related products.
Fertilizer demand was up early in 2022, and that’s been the catalyst for CF stock which is up 41% for the year as of September 28, 2022. And CF stock was up 67% for the year before giving up some of those gains along with the broader market.
CF stock is trading at an appealing P/E ratio of just over 8x. Revenue and earnings growth is expected to decline over the next five years. However, it’s still supposed to be over pre-pandemic levels through 2024. That should easily allow the company to support a dividend.
About CF Industries
CF Industries Holdings, Inc, together with its subsidiaries, engages in the manufacture and sale of hydrogen and nitrogen products for energy, fertilizer, emissions abatement, and other industrial activities in North America, Europe, and internationally. It operates through Ammonia, Granular Urea, UAN, AN, and Other segments.
Read More - Current Price
- $89.91
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 5 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $88.42 (1.7% Downside)
#5 - Mosaic (NYSE:MOS)
According to the company’s own fact sheets, Mosaic (NYSE:MOS) accounts for 50% of granular phosphate fertilizer in North America and 12% of the same commodity worldwide. That’s reason enough to add Mosaic to this list of agricultural stocks to buy.
The company is headquartered in Tampa, Florida, which carries significance because of hurricane season. It’s a simple case of supply and demand. The company exported approximately $1.4 billion in phosphate fertilizer in 2020. That can make MOS stock attractive in the short term for active traders.
And in the long term, the company has attractive fundamentals, including a P/E ratio that is approximately 5.5x earnings. The company has grown its free cash flow (FCF) in the last two years. And with year-over-year revenue and earnings showing significant growth, investors have reason to believe that Mosaic’s FCF will continue to climb higher.
About Mosaic
The Mosaic Company, through its subsidiaries, produces and markets concentrated phosphate and potash crop nutrients in North America and internationally. The company operates through three segments: Phosphates, Potash, and Mosaic Fertilizantes. It owns and operates mines, which produce concentrated phosphate crop nutrients, such as diammonium phosphate, monoammonium phosphate, and ammoniated phosphate products; and phosphate-based animal feed ingredients primarily under the Biofos and Nexfos brand names, as well as produces a double sulfate of potash magnesia product under K-Mag brand name.
Read More - Current Price
- $25.44
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 4 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $33.22 (30.6% Upside)
#6 - Agco (NYSE:AGCO)
If a picks-and-shovel play on agriculture is more your style, you may be interested in Agco (NYSE:AGCO). From tractors to feed storage system, if you can think of a piece of farming equipment, there’s a high probability that Agco either makes it or makes parts for it.
AGCO stock is down 16% in 2022. However, much of that loss has taken place in the sell-off sparked by the Federal Reserve’s interest rate hikes. The company remains attractively priced with a P/E ratio of just over 9x. The stock receives coverage from at least 24 analysts who have a consensus price target of $139.23, a 42% increase from its level as of September 28, 2022.
Agco is projected to show mid-single-digit growth in both earnings and revenue over the next five years. That should be enough for the company to reward value investors with a dividend that it’s been issuing for over 10 years.
About AGCO
AGCO Corporation manufactures and distributes agricultural equipment and related replacement parts worldwide. It offers horsepower tractors for row crop production, soil cultivation, planting, land leveling, seeding, and commercial hay operations; utility tractors for small- and medium-sized farms, as well as for dairy, livestock, orchards, and vineyards; and compact tractors for small farms, specialty agricultural industries, landscaping, equestrian, and residential uses.
Read More - Current Price
- $92.03
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $114.40 (24.3% Upside)
#7 - Farmland Partners (NYSE:FPI)
The last agricultural stock on this list is Farmland Partners (NYSE:FPI). This is one of only two publicly traded real estate investment trusts (REITs) that provide exposure to farmland. As of this writing, Farmland Partners owns approximately 155,000 acres of high-quality farmland in 16 states. The company also offers loans to farmers.
Owning and owning farmland is becoming a big business. In Illinois, farmland values are up 18% year over year, and the same is true in neighboring states such as Indiana (30%) and Iowa (29%).
Still, investing in FPI stock will require believing that growth will continue. Analysts are forecasting single-digit revenue growth over the next five years. That may not get investors excited, but that is projected to translate to an average gain in earnings per share of over 30% in that same time frame.
FPI stock is up 8% for the year, and it pays a quarterly dividend that currently pays out 24 cents per share on an annual basis.
About Farmland Partners
Farmland Partners Inc is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of December 31, 2023, the Company owns and/or manages approximately 171,100 acres in 16 states, including Arkansas, California, Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina and Texas.
Read More - Current Price
- $12.41
- Consensus Rating
- Buy
- Ratings Breakdown
- 2 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $15.00 (20.9% Upside)
Investing in agriculture allows investors to take advantage of opportunities in the present and in the future. With more attention being paid to sustainable agriculture methods, digitalization, and autonomous technology, this is a sector that offers something for growth and value investors alike.
If individual stock picking is not your thing, you can consider investing in an ETF that provides broad exposure to this sector. One choice is the iShares MSCI Agriculture Producers ETF (NYSEARCA:VEGI). One of the benefits of this ETF is that it is not investing in the commodities themselves, which can be the case with many ETFs in this sector. As such, it's more suitable for long-term investors who are looking for capital growth over time.
If you're an experienced investor with a high risk tolerance and who understands the volatility of the commodities market, you could consider the PowerShares DB Agriculture Fund (NYSARCA:DBA). This fund invests directly in futures contracts and ranch commodities.
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