Underpinning the global economy is the often forgotten farming industry. But what are the best agriculture stocks to buy?
It’s difficult to see the woods from the trees when researching agriculture companies because a wide variety of types exist.
Should you buy companies that specialize in fertilizers, seeds, agricultural chemicals, livestock feed, animal foods, ethanol, dairy products, poultry, eggs, beef, pork, or poultry?
The list of agriculture stocks to buy is seemingly endless so where do you begin?
Start by focusing on companies that have earned reputations as producers of great products and have built strong brand value. It’s a plus if they also have longevity on their side. No company exemplifies these competitive advantages more than Scotts Miracle-Gro.
Best Agriculture Stocks: Scotts Miracle-Gro (NYSE:SMG)
Scotts Miracle-Gro [SMG] has a competitive advantage few companies enjoy: brand value. It’s well known among consumers for its lawn and garden products, which it manufactures and sells.
Whether you want to buy fertilizers, grass seed products, outdoor cleaners or disease-control products, you don’t need to look much further than Scotts Miracle-Gro [SMG].
Gardeners know they can trust Scotts for gardening and landscape products, as well as plant foods, garden soil, and potting mixes. Scotts has embraced the trend towards organic products with a lineup of offerings too.
As a multi-billion dollar company, Scotts has a diverse revenue stream that extends to hydroponic products, rodent and insect control, and weed control.
And the likelihood is even if consumers didn’t know they were buying a Scotts Miracle-Gro product, they actually were because Scotts brand names include OxiClean, Grub-Ex, Tomcat, Roundup, SuperSoil, Earthgro, PatchMaster, and a dozen or more other names.
Scotts has an extensive distribution network, selling to hardware companies, warehouse clubs, home centers, nurseries, garden centers, and even food and drug stores. It also operates a direct sales force which targets hydroponic distributors and retailers.
For conservative-minded investors, a plus for Scotts Miracle-Gro is that it also offers a reasonably generous dividend north of 2% at the time of our research.
Top Agriculture Stocks To Buy Now: CF Industries (NYSE:CF)
CF Industries [NYSE:CF] is a fertilizer company that manufactures nitrogen products, such as ammonia, urea ammonium nitrate, and ammonium nitrate.
Like Scotts Miracle-Gro, CF Industries [CF] has diverse revenue streams that include diesel exhaust fluid, nitric acid, and aqua ammonia.
CF Industries sells to a wide variety of customers, including farmers, industrial users, independent fertilizer distributors, and cooperatives.
From an investment perspective, the more revenue streams the lower the risk which is a plus for CF Industries.
And like SMG, CF Industries has longevity on its side having been founded in Illinois in the middle of the last century.
For income-oriented investors, SMG offers an attractive 2.75% dividend (at the time this article was written).
You could also goose the return somewhat by selling calls options against shares to create covered call strategies.
Agriculture Stocks ETF: DBA
The PowerShares DB Agriculture ETF [DBA] is issued by Invesco and has high liquidity, a key consideration for any exchange-traded fund.
The goal of the agriculture ETF is to mirror the returns of the Diversified Agriculture Index Excess Return (DBIQ).
As you might expect for an Ag ETF, it features futures contracts on agricultural commodities, which helps to keep liquidity high.
Another agricultural ETF worth checking out is issued by iPath called the Bloomberg Grains Total Return ETN [JJG].
It’s got a slightly lower expense ratio than the PowerShares DB Agriculture ETF and performed better this year by a wide margin.
However, returns over the past 10 years in almost all agriculture exchange-traded funds has been poor, which is no surprise given the macroeconomic climate. But commodities tend not to stay depressed for multiple decades which may bode well for the next ten years of returns.
Agriculture Stocks List
The thesis behind buying agricultural stocks is that global populations continue to grow and demand more protein which in turn requires more livestock feed, fertilizers, and seeds.
Crops are affected by climate so whether the temperature becomes excessively hot or cold, it becomes increasingly more difficult to farm arable land.
The companies likely to thrive in the future will be the ones that have the best balance sheets, cash levels, and growth opportunities.
Here is an agriculture stocks list that features some of the biggest and best 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
Do you have agriculture stocks list that you track? What top agriculture stocks have you researched that are worth investing in? Contact us and let us know.