This week President Obama signed a $956 Billion dollar farm bill. As you can see just by the number, agriculture is a huge business in the United States. Now only do we have the raw commodity producers, but also we have the slew of businesses that bring the food to our supermarkets.
There are several basic reasons why investing in agriculture stocks is sound investment. Here are a few of these ideas:
Even in the face of record crops, our grain inventories are falling to their lowest level in 40 years. This is due to strong demand from developing countries like China and India.
Worldwide grain consumption keeps rising. The world consumes 2,600 bushels of grain PER SECOND, double our 1974 amount.
Biofuels are driving up the price. The group of countries using biofuels include the EU, Canada, Japan, Brazil and India. 50% of the arable land in North America is used for biofuel production, with only 6% of the water.
The earth has only three feet of topsoil. Much of our topsoil is lost to erosion, development and desertification. We are using our land 10 times faster than we are replacing it.
China feeds 20% of the world’s population with only 10% of arable land and 6% of its water. If China increases its imports by just 5%, it will wipe out our exported supply.
With the stock market on a bumpy start to the new year, we might consider investing in agriculture stocks. Keep in mind that they are subject to weather, world economic conditions and supply and demand. Yet we all must eat.
Here are a the leaders in this sector.
Gruma SA De C.V. (GMK) Recent price is $32.07. 52 week high/low is $34.14/$12.47 EPS is $1.23 PE ratio is 26.41 Market Cap is $3.47 B Headquartered in Mexico, Gruma is the worldwide leader in the production and marketing of corn flour and tortillas.
The Andersons (ANDE) Recent price $84.14 52 week high/low is $92.42/$46.66 EPS is $3.95 PE ratio is 21.51 Dividend is $.66(,078% yield) Market Cap is $1.5 B. The company merchandises grain, operates grain elevators, distributes wholesale fertilizer and operates retail farm centers.
Archer Daniels Midland (ADM) Recent price $39.89 52 week high /low is $43.99/$30.08 EPS is $2.00 PE ratio is 16.64 Dividend is $.76 (1.94% yield) Market Cap is $26.30 B. ADM is world powerhouse in the Ag business. It is one of the largest processors of soybeans, corn, wheat and cocoa, soybean oil and meal, corn sweeteners, flour, cocoa, chocolate, ethanol and bio diesel fuels.
Mgp Ingredients (MGPI) Recent price $5.42 52 week high/low is $6.24/$3.78 EPS is $-.33 Market Cap is $96.75 M. Headquartered in Kansas, the company is a pioneer in the marketing of value added protein and starches derived from wheat. It also produces food grade alcohol and commercial ethanol.
Monsanto (MON) Recent price is $110.75 52 week high/low is $117.54/$94.00 EPS is $4.59 PE ratio is 23.59 Dividend is $1.72 (1.58% yield) Market Cap is $58.24 B Monsanto provides herbicides, seed and related genetic trial products. It helps growers increase crop yields while controlling weeds, insects and disease.
Bunge Ltd. (BG) Recent price is $75.19 52 week high/low is $84.18/$65.74 EPS is $4.51 PE ratio is 16.60 Dividend is $1.20 (1.60% yield) Market Cap is $11.07 B Bunge is a world leader of farm to consumer agricultural products. It moves, distributes and markets food on five continents.
The above discussion is neither a recommendation to buy nor to sell these securities. You must always do your own diligent research.