In this article, we discuss the 12 best farmland and agriculture stocks to buy according to hedge funds. To skip the detailed analysis of the farmland and agriculture industry, go directly to the 5 Best Farmland and Agriculture Stocks To Buy.
Similar to most industries in the market, the agriculture industry has also faced some volatility over the last few years. Even though the industry is indispensable due to the rising global population and growing demand for food, the agriculture business is susceptible to market weaknesses. The COVID-19 pandemic, the Russia-Ukraine war, and the recent Red Sea attacks, all of them have affected the industry in some capacity.
The United States Department of Agriculture (USDA) reported that between March and April 2020, food service and drinking place sales declined by $47.5 billion compared to the same period a year before. Nevertheless, the US farmers showed resilience, and it can be seen in stock prices between March and April 2020. Between March 22, 2019, and March 20, 2020, iShares MSCI Agriculture Producers ETF (VEGI) and VanEck Agribusiness ETF (MOO) declined by 30.69% and 27.07%, respectively. This loss in share prices wasn’t limited to agriculture stocks but also the broader market due to the 2020 stock market crash that began on February 20 and ended on April 7, 2020. In the next 12 months, iShares MSCI Agriculture Producers ETF (VEGI) and VanEck Agribusiness ETF (MOO) gained 110% and approximately 97%, respectively.
Compared to the pandemic, the Russian invasion had more adverse effects on the agriculture market, as Ukraine and Russia are some of the biggest grain exporters in the world. The agriculture stocks climbed significantly shortly after the attack due to rising commodity prices, but this was short-lived, and these ETFs have not recovered after their April 2022 highs. MSCI Agriculture Producers ETF (VEGI) is still down nearly 24% from its April 14, 2022 levels, and VanEck Agribusiness ETF (MOO) is over 31% lower at the time of writing on March 22.
In an interview for CNBC on May 16, 2022, Sal Gilbertie, president and CEO of Teucrium Trading LLC, said that after the pandemic and the war, the demand for commodities rose due to anticipated supply chain disruptions and not because of their need, which according to him are the biggest ripple effects of the two major events.
To put things in perspective, before the war, Ukraine exported 6 million tons of corn and wheat combined per month. The exports reached their highest levels post-war in December 2023, which were 5.18 million tons, as reported by gro-intelligence. This shows that the Ukrainian grain imports are recovering but have not reached the pre-war levels.
In addition to all of that, the widespread presence of mine contamination due to the war is also a significant threat to the farmers in Ukraine. According to Ukraine’s Ministry of Economy, 6.5 million acres of the country’s farmland are affected by landmines and other explosives.
Since October 2023, the Iran-backed rebel group, the Houthis, has disrupted the Red Sea shipping route in response to the Middle-East conflict. The Red Sea is a prominent shipping route between Europe, Asia, and Australia and is one of the most used seaborne trade routes in the world. The latest sinking of the MV Rubymar vessel by the rebels (as mentioned in our article 11 Oversold Energy Stocks You Can Buy Right Now), which was carrying fertilizers, shows that these attacks not only threaten the environment but also the costs of goods such as crops, fertilizers, and even oil. These attacks have forced several vessels to take the longer route around Africa.
Despite so many disruptions, farmers around the globe are some of the most resilient people. Events that lead to such disruptions mostly lead to innovations, which we can see in the latest agriculture tech trends.
Latest Agriculture Tech Trends
Some of the best companies in the farmland and agriculture industry, such as Corteva, Inc. (NYSE:CTVA) and Deere & Company (NYSE:DE), have been making moves in smart agriculture. In our article, 30 Most Profitable Agricultural Business Ideas for Young Entrepreneurs, we discussed Corteva, Inc.’s (NYSE:CTVA) LumiGEN seed treatment portfolio, which includes LumiTreo, the new three-way premix fungicide treatment. The seed treatment category leader at Corteva Agriscience, Brad Van Kooten, said:
“LumiTreo fungicide seed treatment will bring a welcome and significant boost to yield potential as the ingredients will provide significant protection against Phytophthora sojae, known as the number one soybean disease for causing substantial yield reduction in North America.”
Corteva, Inc. (NYSE:CTVA) is also one of the leading companies in the genetically modified crops market, as discussed in our article, 15 Countries that Produce the Most Genetically Modified Crops.
Deere & Company (NYSE:DE) is another prominent name in the industry. In a CNBC interview, senior vice president & chief technology officer of the company, Jahmy Hindman, mentioned the company’s See & Spray technology. The technology helps farmers detect weeds in their fields and apply herbicides directly onto them instead of spraying the whole field like farmers used to do before. Furthermore, Deere & Company (NYSE:DE) is also planning to create fully autonomous farms by 2030. Hindman said:
“As AI continues to evolve, we’ll create smarter, more efficient, and more automated machines. They will help farmers care for every plant in every square foot of their field. It will make every job on the farm more productive and profitable. AI will also help us reach our goal of creating a fully autonomous production cycle for corn and soybean farmers by 2030. This means crops can be planted, sprayed, and harvested with autonomous technology. To reach this goal, we’ll continue deploying AI — along with robotics, sensors, data, and connectivity — to meet our customers’ most pressing needs.”
Growth of Organic Farming
In our article, 11 Best Organic Food and Farming Stocks To Buy posted in October 2023, we mentioned that the world is moving toward sustainable practices and it is leading to the growth of the organic farming industry. In 2010, the US organic food products sales were around $26.9 billion (inflation-adjusted to 2021 dollars) and reached $52.0 billion in 2021. Furthermore, USDA reported that between 2010 and 2021, certified organic cropland acres saw a 79% rise, reaching 3.6 million acres, while pastureland/rangeland experienced a 22% decrease. Moreover, the number of certified operations increased by over 90%, reaching 17,445 farms.
According to a market report by the Business Research Company, the global organic food market value is expected to increase from $215.350 billion in 2022 to $412.928 billion in 2027 and grow further to $894.554 billion by 2032. Between 2023 and 2027, the organic food market is expected to register a compound annual growth rate (CAGR) of 13.9%, and between 2028 and 2032, it is expected to grow at a CAGR of 16.7%.
Keeping all of the above data in mind, some of the best farmland and agriculture stocks include Deere & Company (NYSE:DE), Corteva, Inc. (NYSE:CTVA), and Caterpillar Inc. (NYSE:CAT).
12 Best Farmland and Agriculture Stocks To Buy According to Hedge Funds
Our Methodology
For this article, we identified 20 companies with major operations in the agriculture industry using the Yahoo Finance stocks screener. We narrowed down our selection to stocks that were the most widely held by institutional investors and ranked them in ascending order of the number of hedge funds that have stakes in them as of Q4 of 2023.
The hedge fund data was taken from Insider Monkey’s database of 933 elite hedge funds. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
12 Best Farmland and Agriculture Stocks To Buy According to Hedge Funds
12. Tyson Foods, Inc. (NYSE:TSN)
Number of Hedge Fund Holders: 29
Tyson Foods, Inc. (NYSE:TSN) is an Arkansas-based company and it is one of the biggest processors and distributors of beef, chicken, and pork products. Moreover, it also runs a prepared foods segment.
As per Insider Monkey’s database, hedge fund sentiment was positive toward Tyson Foods, Inc. (NYSE:TSN) in the fourth quarter of 2023. 29 hedge funds held positions in the stock worth $1.1 billion. This is compared to 24 funds in the previous quarter, with positions worth $785.24 million. As of Q4, 2023, Pzena Investment Management is the largest shareholder in Tyson Foods, Inc. (NYSE:TSN), and its stake amounts to $316.465 million.
On February 8, Tyson Foods, Inc. (NYSE:TSN) declared a quarterly dividend of $0.49, payable by June 14 to the shareholders of record on May 31. As of March 21, the stock’s dividend yield is 3.38%.
Tyson Foods, Inc. (NYSE:TSN) is one of the best farmland and agriculture stocks to buy according to hedge funds, along with Deere & Company (NYSE:DE), Corteva, Inc. (NYSE:CTVA), and Caterpillar Inc. (NYSE:CAT).
11. CNH Industrial N.V. (NYSE:CNHI)
Number of Hedge Fund Holders: 29
CNH Industrial N.V. (NYSE:CNHI) is an equipment and services provider that, under its agriculture segment, designs, manufactures, and offers equipment and technology used in the agricultural industry, like hay and forage equipment, planting and seeding equipment, etc.
On February 20, CNH Industrial N.V. (NYSE:CNHI) announced that it made a minority investment in Bem Agro through its CNH Ventures. With this partnership, the company would provide farmers with enhanced resource allocation, field operations, and more, owing to the agronomic maps by Bem Agro.
The number of hedge funds with investments in CNH Industrial N.V. (NYSE:CNHI) remained the same in Q3 and Q4, i.e. 29. However, the total stake value increased to $1.138 billion in the fourth quarter from the third quarter’s $590.498 million. As of December 31, 2023, Natixis Global Asset Management’s Harris Associates is the top shareholder in the company. The firm has increased its stake by 31%, and its position is worth $1.955 billion as of December 31.
Oakmark Funds made the following comment about CNH Industrial N.V. (NYSE:CNHI) in its Q3 2023 investor letter:
“CNH Industrial N.V. (NYSE:CNHI) (Italy), which designs, manufactures, and distributes agricultural and construction equipment, was the top detractor for the quarter. CNH Industrial’s share price fell following its second-quarter results, as agriculture equipment sales rose 5% in local currency, a slowdown from the prior quarter. This performance fell below market expectations due to destocking activity in Brazil and some production ramp-up issues for its new Patriot sprayer. We believe the production issues are temporary while the destocking actions will better position the business for the midterm. Pricing power remains quite strong and increased by roughly 7%, and precision agricultural sales grew by 21%. While the market was overly focused on near-term demand and sales growth, the agriculture equipment division produced its highest quarterly margin ever at 16.8%—an encouraging development that supports our view of the company’s long-term profitability. Further, the much smaller construction business delivered strong results, including its own quarterly margin record. Management maintained guidance for the rest of the company’s current fiscal year and indicated it expects to exceed the 2024 targets laid out at a capital markets day in 2022. We recently met with CEO Scott Wine at the company’s offices. He expressed confidence in the company’s ability to drive much better through-cycle financial performance while avoiding the company’s previous mistakes. He also believes the company’s share price is materially undervalued, and although he would prefer to invest in the business, he sees an opportunity to increase returns to shareholders via share repurchases. We believe CNH Industrial remains a solid business in an attractive industry that is run by a much-improved management team.”
10. The Scotts Miracle-Gro Company (NYSE:SMG)
Number of Hedge Fund Holders: 30
The Scotts Miracle-Gro Company (NYSE:SMG) is an Ohio-based company that serves the agricultural industry through products, like organic products for gardeners, pesticides, hydroponic nutrients, and more. The company sells its products under various brands, including EZ Seed, Miracle-Gro Organic Choice, etc. The Scotts Miracle-Gro Company (NYSE:SMG) has a market capitalization of $4.103 billion as of March 21.
On March 20, The Scotts Miracle-Gro Company’s (NYSE:SMG) subsidiary, Hawthorne Gardening Company, announced that it entered into a strategic partnership with BFG Supply, under which the company’s proprietary Signature brand cultivation supplies and solutions will be distributed by BFG.
As of the fourth quarter of 2023, 30 hedge funds have a stake worth $169.391 million in The Scotts Miracle-Gro Company (NYSE:SMG). Schonfeld Strategic Advisors has increased its stake by 42% in the company in Q4, 2023, to 444,336 shares worth $28.326 million, making the firm the largest shareholder of the company.
Madison Funds made the following comment about The Scotts Miracle-Gro Company (NYSE:SMG) in its Q4 2022 investor letter:
“Stock selection was the poorest for us in this sector. Two stocks in particular – Hain Celestial (HAIN) and The Scotts Miracle-Gro Company (NYSE:SMG) – while big winners for us in 2020 and 2021, hurt the portfolio in 2022.
While both companies were so-called COVID beneficiaries (businesses that benefited from consumers staying home and spending on their homes during COVID), we felt they possessed certain additional drivers that would maintain their fundamentals into 2022 and beyond.
Scott’s Miracle-Gro is arguably one of the great American franchises. The brand is synonymous with lawn care and pest control, has a dominant market share (~60%) with historically-impressive ~30% cash flow margins, and has the country’s largest Cannabis supply business. Scotts’ core business saw a significant windfall during COVID lockdowns. Lawn and garden care is not a growth business, and SMG dominance does not allow for much incremental gain in market share. However, our thesis was that even in a reopening scenario where lawn and garden businesses would revert to the mean, the cannabis market was poised for years of growth as more states legalized recreational use.
What we missed was the highly inefficient structure of the U.S. cannabis market. Currently, California, Colorado, and Michigan have the biggest and most mature markets. However, over the course of the last few years, several very large states and regions have voted to legalize recreational use, including New York, New Jersey, and Connecticut. The fly in the ointment has been Oklahoma, which is a medical marijuana state. Although recreational use is still prohibited, licenses to grow the crop were granted in Laissez Faire fashion to anyone willing to buy one. Oklahoma began to grow and cultivate the crop far in excess of their medical marijuana demand. That excess supply bled into grey markets across the country, devastating pricing for growers in other states. This glut put a near complete stop to capital spending on grow operations. With no new or incremental facilities coming on, Scotts’ Hawthorne business was cut in half from its peak in F21. This, of course, had a devastating effect on the stock.”
9. FMC Corporation (NYSE:FMC)
Number of Hedge Fund Holders: 31
FMC Corporation (NYSE:FMC) is a Pennsylvania-based company that provides products for plant health, crop protection, and professional pest and turf management. The company has a market capitalization of $8.102 billion and has a PE ratio of 5.74 as of March 21.
FMC Corporation (NYSE:FMC) is among the notable farmland and agriculture stocks to buy, as 31 hedge funds had investments in the stock in the fourth quarter of 2023, and their stakes amounted to $305.546 million. D E Shaw is the most dominant shareholder in the company as of Q4 2023 and owns 681,854 shares worth $42.99 million.
On February 28, FMC Corporation (NYSE:FMC) announced a quarterly dividend of $0.58. It is payable by April 18 to the shareholders of record on March 28. The stock has a dividend yield of 3.57% as of March 21.
Aristotle Capital Management, LLC mentioned FMC Corporation (NYSE:FMC) in its fourth quarter 2023 investor letter. Here is what it said:
“FMC Corporation (NYSE:FMC), the global provider of crop protection solutions, was the largest detractor for the year and a top detractor for the fourth quarter. Following robust orders during the 2020-2022 period, customer destocking persisted throughout 2023, particularly in Latin America. Despite strong end-market demand, market forces, including inflationary prices and sharply higher interest rates, have combined to motivate customers to draw down existing inventories. As a result, FMC lowered its 2023 guidance and introduced a global restructuring initiative. In November, we attended FMC’s Investor Day where management detailed its strategic plans and introduced mid-term financial goals. We came away with increased confidence that FMC is at or near a cyclical bottom and that management is taking appropriate actions in navigating the worst downcycle the crop protection market has seen in more than 40 years.”
8. Bunge Global SA (NYSE:BG)
Number of Hedge Fund Holders: 32
Bunge Global SA (NYSE:BG), through its different segments, is engaged in the production, purchase, storage, transportation, processing, and selling of various products, including but not limited to oilseeds, grains, packaged and bulk oils, and fats. In the fourth quarter of 2023, 32 hedge funds held positions in Bunge Global SA’s (NYSE:BG) stock, and their stakes amounted to $210.717 million.
On March 4, Bunge Global SA (NYSE:BG) announced that it approved an investment decision along with Chevron Corporation (NYSE:CVX) for their joint venture, Bunge Chevron Ag Renewables LLC. With the investment, a new oilseed processing plant will be built, and it is expected to start operations in 2026.
Over the past three months, 11 Wall Street analysts have covered Bunge Global SA (NYSE:BG), and 8 maintain a Buy rating for the stock. As of March 21, the stock’s average price target is $115.30 and has a high forecast of $138.00. Furthermore, the average price target implies an upside of 15.17% from the closing price of $100.11 as of March 21.
7. AGCO Corporation (NYSE:AGCO)
Number of Hedge Fund Holders: 32
AGCO Corporation (NYSE:AGCO) is a Georgia-based manufacturer and distributor of agricultural equipment and related parts. The company sells its products under various brands, including Challenger, Fendt, Gleaner, Massey Ferguson, etc. AGCO Corporation (NYSE:AGCO) is trading at a cheaper price than some of its peers. The stock is trading at a price-to-earnings multiple of 7.5x as of March 21.
Wall Street is bullish on AGCO Corporation’s (NYSE:AGCO) stock. On March 14, Truist initiated coverage of the stock with a Buy rating and a $142 price target.
The stock was part of 32 hedge funds’ portfolios in Q4 of 2023, with positions worth $415.837 million. This is compared to 26 funds in Q3, with stakes amounting to $289.151 million. As of December 31, 2023, Cliff Asness’ AQR Capital Management is the top shareholder in the stock and has a position worth $133.256 million.
6. Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 34
Archer-Daniels-Midland Company (NYSE:ADM) is an Illinois-based company that procures, transports, stores, processes, and merchandises agricultural commodities, and more. In Q4 2023, 34 hedge funds held positions in the stock worth $819.294 million. In the fourth quarter of 2023, AQR Capital Management is the most significant shareholder in the stock and has a position worth $158.67 million.
On March 13, Archer-Daniels-Midland Company (NYSE:ADM) announced that it entered an accelerated share repurchase agreement with Merrill Lynch International to repurchase its common stock worth $1 billion. The program is expected to finish by the end of the second quarter of 2024 and is a part of the ongoing 200 million share repurchase program of the company.
Deere & Company (NYSE:DE), Corteva, Inc. (NYSE:CTVA), and Caterpillar Inc. (NYSE:CAT) are some of the best farmland and agriculture stocks to buy according to hedge funds, in addition to Archer-Daniels-Midland Company (NYSE:ADM).
Horizon Kinetics LLC stated the following regarding Archer-Daniels-Midland Company (NYSE:ADM) in its fourth quarter 2023 investor letter:
“There are the securities exchanges in our strategies, of course, which we’ve adequately covered. Also, ‘2nd tier’ varieties of asset-light businesses, like car dealerships (AutoNation and Penske Auto Group) and shipping brokers (Clarkson PLC and Braemar PLC). Less well reviewed have been a few companies that are asset intensive, but have particular inflation-beneficiary attributes.
One such is Archer-Daniels-Midland Company (NYSE:ADM), one of the largest agricultural commodities processors. They turn grains and legumes into flour, protein meals, oils, starches, syrups, cellulose pulp, what have you. Almost everything on a dinner plate came through, in some fashion, ADM’s hands. Yes, they have machinery, terminals, ships, railroad cars. And as an intermediary, theirs is a low-margin business. But it is a constant-spread business that earns a pretty stable margin on a very large sales base. When pricing rises for a period of time, that percentage spread is on a higher dollar amount, hence more dollars of income—so income can rise nicely when agricultural commodities do. And there is the opportunity to expand their margins somewhat…” (Click here to read the full text)
Click to continue reading and see the 5 Best Farmland and Agriculture Stocks To Buy According to Hedge Funds.
Suggested articles:
Disclosure. None. 12 Best Farmland and Agriculture Stocks To Buy According to Hedge Funds is originally published on Insider Monkey