Food and agricultural stocks can diversify and strengthen a high-risk equities portfolio. Companies involved in the production and distribution of necessities like food hold up well in recessions and can pass on rising costs to consumers, which can shield investors from the negative effects of inflation.
Owing to these characteristics, the agriculture sector outperformed the broader market during 2022’s selloff, with the VanEck Agribusiness ETF (MOO) ending the year down 8%, compared to the Russell 1000 Index’s 15% drop. Year to date, however, MOO has underperformed the Russell 1000’s 7% gain, as investors' appetite for risk has returned in anticipation of a slowing Fed.
For those looking to take advantage of the sector’s pullback, CVR Partners LP, Cal-Maine Foods Inc, and Performance Food Group are the best names heading into Q2 in terms of value, growth, and total return
Below we look at the three top agriculture stocks in three categories: best value, fastest growth, and most momentum. All data are as of April 6.
Best Value Agriculture Stocks
These are the agriculture stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
|Best Value Agriculture Stocks|
|Price ($)||Market Cap ($B)||12-Month Trailing P/E Ratio|
|CVR Partners LP (UAN)||85.64||0.9||3.2|
|Cal-Maine Foods Inc (CALM)||55.70||2.7||3.6|
|ICL Group Ltd (ICL)||6.42||8.3||3.8|
- CVR Partners LP.: CVR Partners engages in the production and sale of ammonia and urea ammonium nitrate solution fertilizer products in the United States. Average ammonia prices doubled in 2022, while ammonia nitrate prices increased 84% year-over-year. Subsequently, CVR Partners' earnings nearly doubled, with EBITDA of $403 million in 2022 compared with $212 million in 2021.
- Cal-Maine Foods: Cal-Maine handles the production, packaging, marketing, and distribution of shell eggs for supermarkets, distributors, and consumers across the United States. A bird flu outbreak killed 43 million egg-laying hens last year, according to the USDA, causing U.S egg prices to double, rising to nearly $5 a dozen in December from less than $2 in January. Cal-Maine’s bottom line increased eightfold for the quarter ending Feb. 25.
- ICL Group Ltd.: ICL is a specialty chemical and minerals producer, focusing on potash and phosphate products and their by-products. Similar to CVR, ICL capitalized on higher potash prices in 2022, generating sales growth of 44% and EBITDA growth of 137%.
Fastest Growing Agriculture Stocks
These are the top agriculture stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth.
Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general.
Companies with quarterly EPS or revenue growth of over 1,000% were excluded as outliers.
|Fastest Growing Agriculture Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)||Revenue Growth (%)|
|Cal-Maine Foods Inc (CALM)||55.70||2.7||717||109|
|Sociedad Quimica Y Minera De Chile SA (SQM)||73.36||21||258||189|
|Deere & Co (DE)||369.65||109||124||32|
- Cal-Maine Foods: See company description above.
- Sociedad Quimica y Minera de Chile SA: SQM is a major global producer of industrial chemicals, lithium, and plant nutrients. SQM experienced exceptionally strong demand for lithium—primarily from the Chinese electric vehicle sector—in the fourth quarter of 2022, causing lithium revenues to increase 771% year over year.
- Deere & Co.: Deere is a global leader in the production of all equipment related to farming as well as construction, forestry, earthmoving and lawn/ turf care. Strong demand, leading to higher shipments and realized prices, propelled Deere to deliver year over year net sales and EPS growth of 34% and 124%, respectively for Q1, while guiding 2023 net income in the $8.75B to $9.25B range, up from $7.1B in 2022.
Agriculture Stocks with the Most Momentum
These are the agriculture stocks that had the highest total return over the last 12 months.
|Agriculture Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Performance Food Group Co (PFGC)||60||9.4||23|
|The Toro Co (TTC)||100.98||10.5||23|
|Fresh Del Monte Produce Inc (FDP)||30.26||1.5||20|
|VanEck Vectors Agribusiness ETF (MOO)||84||N/A||-21|
- Performance Food Group Co.: Performance Food Group is involved in the marketing and distribution of groceries, frozen foods, beverages, cigarettes, meat, seafood, and health and beauty products. It also sells cleaning supplies and provides value-add services such as operational strategy and menu development. Its customers include retailers, hospitals, restaurants, airports, bookstores, and theaters. Experiencing strong sales momentum, Performance Food Group recently upped its adjusted EBITDA guidance for 2023.
- The Toro Co: Minnesota-based Toro designs, manufactures, and markets landscaping, underground construction, and snow and ice management equipment. The company also manufactures irrigation and lighting products. Supply chain and operational improvements, along with sales momentum, helped the company record profitability gains across the entire enterprise in the first quarter of 2023.
- Fresh Del Monte Produce Inc.: Fresh Del Monte is a vertically integrated producer, marketer, and distributor of fresh fruits and vegetables across the globe. In the final quarter of 2022, net income doubled to $81.7 million on 2% revenue growth and increased profit margins, as the company was able to set higher prices based on inflationary conditions.
Advantages of Agriculture Stocks
One of the biggest advantages of agriculture investments is that people always need to eat, so there will usually be stable demand in the industry. As a result, some investors see this sector as somewhat recession-proof and a good way to diversify a portfolio.
Another benefit from this sector is that farmland real estate investment trusts (REITs) and certain agriculture stocks can provide passive income through regular dividend payouts. In addition, farmland investments may be able to provide a hedge against rising inflation.
Risks of Agriculture Stocks
The agricultural and farming sector as a whole can be unpredictable for investing, as it's subject to several risk factors. Uncertainties from weather to government policies to global commodities markets can cause volatile price and income swings that affect these types of investments. Here are some risks inherent in agriculture investments:
- Production risk: Major weather events, crop diseases, and other factors can affect the quantity and quality of commodities produced.
- Market risk: Global markets for commodities can impact farming and agricultural businesses as prices can swing abruptly, bringing uncertainty to crop production and agribusiness demand.
- Financial risk: Farms and related businesses often use debt to fund operations, so rising interest rates and credit tightening can be a blow to companies in the industry.
- Regulatory risk: Changes in taxes, regulations, subsidies, and other government moves also can have a negative, or positive, impact on agricultural businesses and investments.
CVR Partners LP. “2022 Annual Report.”
Cal-Maine. "Cal-Maine Foods Reports Results for Third Quarter Fiscal 2023."
ICL Group Ltd. “ICL Reports Record Full Year and Fourth Quarter 2022 Results”
Sociedad Quimica y Minera de Chile SA. “SQM REPORTS EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2022.”
Deere & Co. “1Q 2023 Earnings Call Presentation”
Performance Food Group Co. “Performance Food Group Company Reports Second-Quarter and First-Half Fiscal 2023 Results”
The Toro Co. “The Toro Company Reports Record Results for the First-Quarter of Fiscal 2023”
Fresh Del Monte Produce Inc. “Fresh Del Monte Produce Inc. Reports Fourth Quarter and Full Fiscal Year 2022 Financial Results”