Spreadsheet and table data updated daily
Updated on October 29th, 2019 by Bob Ciura
Individual products, businesses, and even entire industries (newspapers, typewriters, horse and buggy) go out of style and become obsolete.
Perhaps more than any other industry, agriculture is here to stay. Agriculture started around 14,000 years ago. It’s a safe bet we will be practicing agriculture far into the future.
And, the growth of the global population is tied to increasing agricultural efficiency. The agricultural revolution allowed greater population growth (and precluded the industrial revolution).
As the global population grows, so does the need for improved agricultural production. This creates a long-term demand driver for agricultural stocks.
You can download the complete list of all 36 agricultural stocks at the link below:
Investing in farm and agriculture stocks means investing in an industry that:
- Has stable long-term demand
- Has withstood the test of time, and is extremely likely to be around far into the future
- Benefits from advancing technology
This article analyzes 10 of the best agricultural stocks in detail. You can quickly navigate the article using the table of contents below.
Table of Contents
- Agriculture Stock #10: Calavo Growers (CVGW)
- Agriculture Stock #9: AGCO Corporation (AGCO)
- Agriculture Stock #8: Bunge Limited (BG)
- Agriculture Stock #7: Fresh Del Monte Produce (FDP)
- Agriculture Stock #6: The Mosaic Company (MOS)
- Agriculture Stock #5: Scotts Miracle-Gro (SMG)
- Agriculture Stock #4: CF Industries Holdings (CF)
- Agriculture Stock #3: Deere & Company (DE)
- Agriculture Stock #2: Archer Daniels Midland (ADM)
- Agriculture Stock #1: Caterpillar Inc. (CAT)
- Final Thoughts
We have ranked our 10 favorite agriculture stock picks below. These rankings are qualitative in nature. We believe the following 10 stocks are the best picks in the agriculture industry right now, due to a combination of business quality and future growth prospects.
Agriculture Stock #10: Calavo Growers Inc. (CVGW)
Calavo Growers operates in the farm products industry. It was founded in 1924. Today, it markets and distributes avocados and other foods. The Fresh Products segment sizes, packs, and ripens avocados for delivery to its customers. The Calavo Foods segment procures and processes avocados into guacamole, and distributes it to customers. Lastly, its Renaissance Food Group produces and distributes a variety of healthy fresh packaged food products, such as tomatoes and papayas, through retail channels.
Calavo Growers earns a place on this list because of its growth story. Avocados are a “super food”, and are loaded with nutrients. As such, they have great appeal to health-conscious consumers. This is an emerging trend in the United States; consumers are becoming much more aware of what they are eating. Fresher, healthier foods like avocados are seeing strong demand as a result. According to Calavo, consumption of avocados in the United States has risen at an 8% annual rate over the past 10 years.
This undeniable trend is evident in Calavo’s huge growth over the past decade. In fact, from 2008 to 2018, Calavo’s sales more than tripled. Earnings rose by more than four-fold in the same period.
Source: Investor Relations
Revenue increased 12% over the first three quarters of the current fiscal year. Calavo expects record sales in 2019, while adjusted earnings-per-share are expected to increase by more than 20% for the full year.
Household penetration of avocados is still below other common fruits, which means Calavo has a long runway of future growth up ahead. Calavo is an industry leader, with durable competitive advantages. It has more than 15 production and distribution facilities throughout the United States, giving the company the opportunity for continued growth in the years ahead
Agriculture Stock #9: AGCO Corporation (AGCO)
AGCO Corporation manufactures agricultural machinery, such as tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage equipment, grain storage, and protein production systems. It has a variety of brands, some of which include Challenger, Fendt, Massey Ferguson, GSI, and Valtra.
AGCO had $9.4 billion in revenue in 2018. Over the first half of 2019, AGCO reported organic revenue growth of 2.9% excluding the impact of currency fluctuations. The best-performing geographic market was Europe & The Middle East, which grew organic sales by 5.8%, followed by North America at 1.7% organic growth.
Year-to-date retail units of tractors and combines have increased at strong rates throughout AGCO’s operating regions, except for tractors in South America.
Source: Earnings Presentation
Over the first half of 2019, consolidated sales (excluding currency) increased 3%, led by 6% growth in Europe & the Middle East, and 2% growth in North America.
Economic growth in the U.S. and Europe is generally positive for large industrial manufacturers. In addition, demand is growing for grain storage and protein production, particularly in the emerging markets, which is a positive indicator for AGCO.
The major risk for AGCO would be a recession. As a heavy machinery manufacturer, AGCO would be severely impacted by a global economic slowdown. But thus far, AGCO continues to report growth and pay dividends to shareholders with a current yield of nearly 1%.
Agriculture Stock #8: Bunge Limited (BG)
Bunge Limited was founded all the way back in 1818. Today, Bunge is a holding company. Its core business is to supply and transport agricultural commodities. The company generated $46 billion in 2018 revenue.
Bunge operates through the following segments: Agribusiness, Edible Oil Products, Milling Products, Sugar and Bioenergy, and Fertilizer.
The Agribusiness segment involves storage and transportation of agricultural commodities. The Edible Oil Products segment includes production and sale of vegetable oils, shortenings, margarines, and mayonnaise. The Milling Products segment produces wheat flours, bakery mixes, corn-based products, and rice. The Sugar and Bioenergy segment manufactures sugar and ethanol, while the Fertilizer segment produces and distributes fertilizer.
Bunge takes a spot on the list of top agriculture stocks because of its strong growth and extremely shareholder-friendly management team. The company is committed to returning lots of cash to shareholders each year. For example, from 2002 to 2017 Bunge raised its dividend by 11% per year, on average. In addition, Bunge has repurchased more than $1.2 billion of its own stock.
Source: Investor Presentation
Bunge generates a great deal of cash flow, which fuels its impressive cash returns to shareholders. Rising global populations are a long-term growth catalyst for Bunge, which will result in higher demand for agricultural commodities of all sorts.
The emerging markets are an increasingly important area for Bunge. The company recently formed a $775 million, 50-50 joint venture with BP’s (BP) sugar and bioenergy assets in Brazil.
Agriculture Stock #7: Fresh Del Monte Produce (FDP)
Fresh Del Monte is one of the world’s largest producers of fruit, and was founded in 1886. The company produces and distributes fresh fruit and vegetables, primarily bananas, pineapples, non-tropical fruit, avocados, melons, tomatoes, vegetables, and more. The company also has a prepared food segment. Fresh Del Monte has greatly diversified its product portfolio in the past 20 years.
For example, in 1996 approximately 75% of the company’s sales were derived from bananas. Today, bananas represent less than half of sales, and the company has significantly broadened its product line.
Source: Investor Presentation, page 13
This expanded focus has served the company well. Its strong results to start 2019 indicate a successful transformation. For example, second quarter adjusted earnings-per-share came to $0.69, up from $0.14 per share in the same quarter last year.
Fresh Del Monte has a positive long-term growth outlook. First, the rising global population is a huge catalyst. According to the company, by 2050 demand for food is expected to rise 70% from current levels. The global population is expected to reach 9 billion by then. Feeding the world’s growing population is a major challenge that will need to be solved, and Fresh Del Monte is set to capitalize.
The company’s durable competitive advantages will fuel its growth. Fresh Del Monte has nearly 50 worldwide distribution centers and nearly 20 fresh cut operations around the world. It also has nearly 20 owned and chartered vessels. Fresh Del Monte is uniquely positioned to serve the world’s growing population and demand for food.
Agriculture Stock #6: The Mosaic Company (MOS)
Mosaic is one of the world’s leading crop nutrition companies, with a focus on potash and phosphate—two of the three most vital nutrients for crop production. The company mines and processes phosphate and potash minerals into crop nutrients, which it then ships to its customers via rail, barge and ocean-going vessels.
Source: Investor Presentation
Manufacturers of agricultural commodities endured a challenging environment over the past few years. Rising global production, especially from China, caused prices to decline across a number of commodities, including corn, wheat, and soybeans. In addition, the threat of a trade war with China and tariffs continues to serve as an overhang.
However, Mosaic continues to perform well. It generates significant cash flow, which the company is using to invest in growth, and to pay down debt. Mosaic reduced debt by approximately $500 million over the course of 2018.
The company struggled with unprecedented wet weather in the U.S., particularly the Midwest to start 2019. As a result, the company reported a net loss of $233 million in the second quarter. However, on an adjusted basis, Mosaic reported adjusted EBITDA of $349 million, along with positive adjusted earnings-per-share of $0.12.
Despite all the various pressures mentioned above, Mosaic expects 2019 to be another year of profitability. The company expects full-year adjusted EBITDA of $1.8 billion to $2 billion for the full year, along with adjusted EPS of $1.10 to $1.50.
Agriculture Stock #5: Scotts Miracle-Gro (SMG)
Scotts Miracle-Gro earns a place on this list because it is a strong business with significant competitive advantages. SMG manufactures lawn and garden care products. Its family of brands includes Scotts, Miracle-Gro, Ortho, and more.
Not only that, SMG owns a minority interest in TruGreen, the largest residential lawn care service business, and in Bonnie Plants, the largest retail marketer of edible gardening plants. SMG also has a subsidiary, The Hawthorne Gardening Company, which services the hydroponic growth segment.
Source: Investor Presentation
These brands lead their respective categories, and SMG has the financial strength to advertise its brands to retain their leadership positions.
SMG is off to a strong start to 2019. Sales increased 19% over the first three quarters of the fiscal year due to 9% sales growth in the core U.S. consumer operating segment. Separately, Hawthorne sales soared 139% over the first three quarters, making SMG a stealth play on the emerging growth story of marijuana.
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Adjusted earnings-per-share increased 22% through the first three quarters, compared with the same nine-month period last year. SMG expects fiscal 2019 to be another strong year. The company forecasts 16%-17% sales growth for the full year, along with adjusted free cash flow of $325 million.
SMG is benefiting from the strong U.S. housing market. With a low unemployment rate and rising home prices, consumers are willing and able to spend more on their lawns and gardens. If the housing market does not enter a downturn over the next several years, SMG has a positive growth outlook going forward.
SMG shares are neither extremely cheap or significantly overvalued, trading at ~22 times the midpoint of the company’s full-year adjusted EPS guidance. Future returns could potentially reach 10% per year, if the company can grow earnings at a high single-digit rate. SMG has an attractive dividend yield of 2.4%.
Agriculture Stock #4: CF Industries Holdings (CF)
CF Industries manufactures and distributes nitrogen fertilizer products in North America. The company was founded in 1946 as a cooperative but eventually went public in 2005. Since that time, it has seen its annual revenue near $5 billion and today, it trades with a market capitalization of $11 billion. CF is a global leader in nitrogen with massive distribution capabilities.
Source: Investor Presentation
CF reported Q2 earnings on 7/31/19 and results were strong, leading to another share price increase. Revenue grew to $1.5 billion from $1.3 billion year-over-year. Volumes were similar against the comparable period as CF navigated a tricky spring growing season in the Midwest.
Flooding and cold weather in that critical growing region was a headwind for CF’s fertilizer business, but it was able to overcome the headwind with higher average selling prices. Tighter global nitrogen supply and demand balance continues to shift towards producers, and logistical issues in North America for the industry helped tip this further into the favor of CF in Q2.
Cost of sales increased fractionally year-over-year due to higher freight costs, which were partially offset by lower plant maintenance and natural gas costs. The company earned $1.28 per share in Q2, more than doubling from the $0.63 it earned in last year’s Q2.
After incurring a couple of difficult years due to falling ammonia and UAN prices—the result of accelerated global production from places like China—the economics are finally starting to normalize. As a low-cost producer, CF simply needed to wait out the period of accelerated production. Companies producing at a loss could not keep it up forever, and CF focused on cutting costs during the downturn.
Now that the environment has reversed, CF is back to growth. It is optimally positioned to benefit from a return to higher fertilizer prices, especially because it has completed major growth projects in recent years. For example, CF invested heavily in its Donaldsonville and Port Neal expansion projects. These projects required a heightened level of investment by CF. But now that the projects are complete, CF’s capital expenditures are falling dramatically. This will help boost cash flow even further, which helps support the company’s cash returns. CF has a dividend yield of 2.6%.
Agriculture Stock #3: Deere & Company (DE)
Deere stands to benefit from major global trends—specifically, the growing population and increasing demand for food. According to the company’s 2018 annual report, agricultural production will need to double in the first half of this century to keep pace with the demand for food. Deere, which manufactures farm equipment for the agriculture industry, will likely see sustained demand for many years as a result.
Deere operates two core segments, Agriculture & Turf and Construction & Forestry, with most of its sales derived from Agriculture & Turf equipment.
Source: Investor Presentation
The past few years have been difficult for Deere, as the company dealt with a severe industry downturn. A steep and prolonged decline in agriculture commodity prices resulted in falling farm incomes around the world. This, in turn, resulted in weaker demand for farming equipment, as farmers postponed or canceled orders for new equipment.
Fortunately, Deere successfully navigated the challenging climate with a strict focus on cost controls. This allowed it to maintain profitability, even during the industry downturn. Now that agriculture commodity prices have recovered, Deere has returned to impressive growth.
On August 16th, 2019 Deere reported third quarter 2019 results for the period ending July 28th, 2019. For the quarter, sales came in at $10.04 billion, representing a 2.6% decline compared to Q3 2018, as a 1% improvement in Construction and forestry was offset by a 6% decline in Agriculture and turf. Still, adjusted earnings-per-share increased 4.6% for the quarter thanks to cost controls.
Deere also updated its outlook for fiscal year 2019. The company now anticipates equipment sales increasing 4% year-over-year, including a 2% negative foreign currency translation.
Deere generates enough cash flow to reward shareholders with dividends and share repurchases, while also investing in future growth. Deere acquired the Wirtgen Group for $5.3 billion, which was the largest acquisition in the company’s history. Wirtgen is a leading manufacturer of road construction equipment, which will expand and diversify Deere’s Construction & Forestry segment.
Deere has a strong balance sheet, excellent brand power, and long-term growth potential. The stock trades for a 2019 price-to-earnings ratio of ~17, and the stock offers a 1.8% dividend yield. These factors make it the highest-quality agriculture stock today.
Agriculture Stock #2: Archer Daniels Midland (ADM)
Archer Daniels Midland sources, transports, processes, and distributes a number of products. Its largest business is Corn Processing, where it converts corn into sweeteners, starches, and bioproducts. The Agricultural Services segment utilizes its extensive global grain elevator, transportation networks, and port operations to buy, store, clean, and transport agricultural commodities.
The Oilseeds Processing segment processes oilseeds, such as soybeans, cottonseed, sunflower seed, canola, rapeseed, and flaxseed. It processes these seeds into vegetable oils and protein meals. Meanwhile, the Wild Flavors and Specialty Ingredients (WFSI) segment manufactures, sells, and distributes flavors, colors, proteins, and emulsifiers.
Archer Daniels Midland is one of the largest agriculture companies in the world. It is a global giant, operating in nearly 200 countries with annual revenue above $64 billion. The stock trades with a market capitalization of ~$23 billion. Archer Daniels Midland’s businesses include the processing of cereal grains and oilseeds, as well as agricultural storage and transportation.
The company has undergone a business transformation in recent years, with multiple acquisitions to boost its global reach.
Source: Investor Presentation
Archer Daniels Midland reported weak second quarter earnings results. The company reported revenues of $16.3 billion for the first quarter, down 4.5% from the same quarter the previous year. Results were hurt by unfavorable weather events, such as the recent flooding in the Midwest which reduced the company’s profits by $125 million in the first two quarters of 2019.
Still, we have a favorable long-term view of the company’s growth prospects. First, the company recently completed the acquisition of the leading European citrus flavor provider, Ziegler Group. This will help position the company as a global leader in the growing natural citrus ingredients market. The company also announced the opening of an upgraded nutrition flavor research and customer center in Beijing. This will help expand and enhance its capabilities in Asia, which is home to many emerging markets such as China and India.
Another positive catalyst is the company’s massive global platform and competitive advantages, it is perfectly situated to capitalize on this emerging theme. Archer Daniels Midland has a huge global network that includes approximately 450 crop procurement locations, more than 330 food and feed ingredient manufacturing facilities, and over 60 innovation centers.
Archer Daniels Midland returns a great deal of cash to shareholders. Along with the company’s most recent dividend declaration, it also announced an extended share repurchase. The company extended its buyback an additional five years, to include an additional 100 million shares. The extra 100 million shares represent approximately 18% of the company’s shares outstanding at the end of last quarter, so this amounts to a significant repurchase
Archer Daniels Midland stock has a dividend yield of 3.4%, and the company has paid 87 years of uninterrupted dividends. In addition, the company has increased its dividend every year for more than 40 consecutive years. This makes Archer Daniels Midland a Dividend Aristocrat.
Agriculture Stock #1: Caterpillar (CAT)
Caterpillar was founded in 1925. Today, it is an industrial giant, manufacturing heavy machinery used in the construction and mining industries. The company also manufactures ancillary industrial products such as diesel engines and gas turbines. Caterpillar generates annual revenue of $58 billion and the stock has a market capitalization of $79 billion.
In late October, Caterpillar reported weak third-quarter financial results. Sales and earnings-per-share declined 6% and 8%, respectively, compared with the same quarter last year. The primary culprit for the declines was a $1.2 billion net decline in dealers’ inventories compared with the same quarter last year. Dealers decreased their inventories by $400 million during the third quarter of 2019, after growing inventories about $800 million during the third quarter of 2018.
Caterpillar’s competitive advantage is its global presence, which affords it economic scale. For example, Caterpillar has the ability to leverage down variable costs per unit, which boosts profit margins. The steady global economic growth over the past several years has fueled positive growth for Caterpillar. Mining companies are expanding operations as commodity prices remain favorable, and construction continues to expand in the U.S., China, and other key markets around the globe. Further, Caterpillar’s own cost-cutting measures have expanded operating margins.
Services will be also be a major long-term growth catalyst.
Source: Investor Presentation
Caterpillar expects to double Machinery, Energy & Transportation (ME&T) services sales to $28 billion by 2026 and deliver higher adjusted operating margins, which should lead to positive long-term earnings growth.
Caterpillar is a shareholder-friendly company. The stock has an attractive 3% dividend yield, and like Archer Daniels Midland it is a member of the Dividend Aristocrats list. Due to its strong growth potential, high yield, and long history of dividend increases, Caterpillar is the top agriculture stock today.
The agriculture industry is a compelling place to look for long-term stock investments. That’s because the demand drivers of the industry make it extremely likely to be around far into the future.
We believe the 10 stocks examined in this article are the best within the industry. Of these, Caterpillar, Deere & Company, and Archer-Daniels-Midland stand above the rest from a quality perspective thanks to their size, strength, and long-term dividend growth potential.