In this article, we discuss 11 best farmland and agriculture stocks to buy heading into 2023. If you want to see more stocks in this selection, check out 5 Best Farmland and Agriculture Stocks to Buy.
Kenneth Scott Zuckerberg, lead analyst and senior economist with CoBank’s Knowledge Exchange division, told S&P Global Commodities Insights in an interview in August 2022 that farmers and customers around the world may have to face a turbulent market well into 2023 given the upside risks to the prices of agricultural commodities and inputs. Prices of primary crops like corn, soybean, and wheat have been accelerating due to the Russia-Ukraine war, weather constraints, and supply chain bottlenecks. According to Zuckerberg, the Russia-Ukraine war will impact the supply of grain and oilseeds for three or more years as Ukraine is one of the world’s largest producers of corn, wheat, and sunflower oil, and the war has tightened the supply of these commodities meaningfully.
High energy costs have also made the production of fertilizers costly. Lately, fertilizer prices have normalized relatively. Yet, the likelihood of natural gas supply challenges in the European Union from Russia can result in a steep increase in gas prices and costs of fertilizers. Zuckerberg further noted:
“If they [Russia] pull supply, natural gas prices go up … it means fertilizer prices go up, and we have a restart to the inflation regardless of what the central banks are doing on interest rates.”
Given that China is one of the biggest producers, consumers, and importers of food and grains in the world, Zuckerberg explained that:
“I think we can’t ignore the China-Taiwan situation because once somebody tells you their intention, it is really important to remember that.”
Farmland and agriculture stocks are likely to continue to boom given the uncertainties in the sector will not tamper with the global demand for agricultural inputs and commodities. Investors usually prefer to invest in farmland and agriculture stocks because of their diversification and inflation hedge characteristics. Billionaire Bill Gates is the #1 private farmland owner in the United States. Some of the best agriculture stocks to invest in include The Mosaic Company (NYSE:MOS), Bunge Limited (NYSE:BG), and Deere & Company (NYSE:DE) according to hedge funds. Gladstone Land Corporation (LAND) is a pure play farmland stock that owns and acquires farm-related properties in the US, however, it failed to make our list because there were only 8 hedge funds with bullish positions in the stock. Farmland Partners Inc (FPI) is also a pure play farmland stock that follows a similar business model, however, Farmland Partners Inc also failed to make our list for the same reason.
Our Methodology
We selected the following agriculture stocks based on positive analyst coverage, strong business fundamentals, and market visibility. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. The list is arranged according to the number of hedge fund holders in each firm.
Kingarion/Shutterstock.com
Number of Hedge Fund Holders: 16
Benson Hill, Inc. (NYSE:BHIL) was incorporated in 2012 and is headquartered in Saint Louis, Missouri. It operates as a food technology company that unlocks natural genetic diversity of plants. The company has two segments, Ingredients and Fresh. On November 10, Benson Hill, Inc. (NYSE:BHIL) reported a Q3 GAAP loss per share of $0.16 and a revenue of $130.18 million, outperforming Wall Street estimates by $0.05 and $45.33 million, respectively. Revenue over the period climbed nearly 307% from the prior-year quarter.
On September 30, UBS analyst Cody Ross initiated coverage of Benson Hill, Inc. (NYSE:BHIL) with a Buy rating and a $5.00 price target. The company is on the brink of transforming its business model into a “proprietary/partnership, high margin, asset-light model”, which should contribute 69% of the sales mix by 2025, the analyst told investors in a research note.
According to Insider Monkey’s data, Benson Hill, Inc. (NYSE:BHIL) was part of 16 hedge fund portfolios at the end of Q3 2022, compared to 17 funds in the last quarter.
Like The Mosaic Company (NYSE:MOS), Bunge Limited (NYSE:BG), and Deere & Company (NYSE:DE), Benson Hill, Inc. (NYSE:BHIL) is one of the best agriculture stocks to monitor.
Number of Hedge Fund Holders: 17
ICL Group Ltd (NYSE:ICL) is headquartered in Tel Aviv, Israel, and it operates as a specialty minerals and chemicals company worldwide. The company has four segments – Industrial Products, Potash, Phosphate Solutions, and Innovative Ag Solutions. It is one of the best agriculture stocks to invest in. In Q3 2022, ICL Group Ltd (NYSE:ICL) reported adjusted EBITDA of $1,049 million, up 139% versus $438 million in the last quarter. Adjusted EBITDA margin came in at 41.6%, up from 24.5% in the prior quarter.
On November 17, Barclays analyst Benjamin Theurer maintained an Equal Weight rating on ICL Group Ltd (NYSE:ICL) and lowered the price target on the shares to $11 from $12 after the earnings season. While the analyst remains positive about the broader agriculture space, he believes fiscal 2023 will in part be a year of relatively more normal earnings levels, with results beating performance prior to sanctions against Belarus being introduced and Russia’s invasion of Ukraine.
According to Insider Monkey’s Q3 data, 17 hedge funds were bullish on ICL Group Ltd (NYSE:ICL), compared to 13 funds in the prior quarter.
Number of Hedge Fund Holders: 28
Next on our list of the best agriculture stocks is FMC Corporation (NYSE:FMC), a Pennsylvania-based agricultural sciences company that provides crop protection, plant health, and professional pest and turf management products. On December 14, FMC Corporation (NYSE:FMC) declared a $0.58 per share quarterly dividend, a 9.4% increase from its prior dividend of $0.53. The dividend is payable on January 19, 2023 to shareholders of record on December 30.
On November 15, Loop Capital analyst Christopher Kapsch upgraded FMC Corporation (NYSE:FMC) to Buy from Hold with a price target of $149, up from $132. The earlier downgrade was due to his belief that the stock’s valuation had gotten ahead of the story, but FMC Corporation (NYSE:FMC) has executed well, which helped derisk its earnings progression, the analyst told investors in a research note.
According to Insider Monkey’s third quarter database, 28 hedge funds were long FMC Corporation (NYSE:FMC) with collective stakes worth $496.5 million, compared to 29 funds in the last quarter worth $361.2 million. Ken Griffin’s Citadel Investment Group held the biggest stake in the company, consisting of 1.2 million shares worth $130 million.
Here is what Aristotle Capital Management Global Equity has to say about FMC Corporation (NYSE:FMC) in its Q1 2022 investor letter:
“FMC is an agricultural sciences company providing solutions for the protection of crops from different pests. Its products are used by farmers to ensure bugs, weeds and fungi do not negatively impact their harvest. Headquartered in Philadelphia, Pennsylvania, the company has a rich history dating back to 1883 when inventor John Bean set out to build a better insecticide spray pump. Over the decades, through acquisitions, FMC became a disparate collection of chemical companies. FMC has transformed itself to solely focus on crop chemicals, having acquired DuPont’s crop chemicals portfolio in 2017, and completed the separation of its lithium business in 2019. FMC is now one of the largest patented crop protection companies globally.
Its presence is balanced both geographically around the world, as well as from a crop exposure standpoint, with soybeans being the largest at roughly 20% of total revenue. In terms of products, FMC’s portfolio skews toward insecticides, which account for over 60% of its revenue. The remainder are herbicides (~25%), as well as fungicides and other crop chemicals (~15%).
High-Quality Business
Some of the quality characteristics we have identified for FMC include:
Attractive Valuation
We believe FMC’s current stock price is offered at a discount to our determination of the company’s intrinsic value given our estimates of both enhanced margins and higher earnings on a normalized basis.
Compelling Catalysts
Catalysts we have identified for FMC, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:
FMC is poised to benefit from its focus on crop chemicals, as yield gains are needed to support rising food consumption in emerging markets;
Continued margin improvements from its product pipeline. These new products should be particularly effective against insects, weeds and fungi that have grown resistant to traditional crop chemicals; and
Further cross-selling of FMC products to DuPont customers. For example, in Argentina, 78% of the customers it gained from the DuPont acquisition were unique to FMC, providing cross-selling opportunities.”
Number of Hedge Fund Holders: 28
CNH Industrial N.V. (NYSE:CNHI) is one of the top agriculture stocks to monitor. The London-based company designs, manufactures, commercializes, and finances agricultural and construction equipment, trucks, commercial vehicles, buses, and specialty vehicles in North America, Europe, South America, and internationally. It operates through five segments – Agriculture, Construction, Commercial and Specialty Vehicles, Powertrain, and Financial.
On November 8, CNH Industrial N.V. (NYSE:CNHI) reported a Q3 non-GAAP EPS of $0.41 and a revenue of $5.88 billion, outperforming Wall Street estimates by $0.08 and $580 million, respectively. For full-year 2022, the company expects net sales to increase between 16% and 18% year-on-year, including currency translation effects.
Credit Suisse analyst Jamie Cook initiated coverage of CNH Industrial N.V. (NYSE:CNHI) on December 20 with an Outperform rating and a $21 price target. Under the leadership of Chief Executive Officer Scott Wine, CNH Industrial N.V. (NYSE:CNHI) has taken a number of solid actions to simplify its portfolio, the analyst told investors. He sees more transformative portfolio actions mostly complete, with the new CNH Industrial N.V. (NYSE:CNHI) simplified and refocused on the customer.
According to Insider Monkey’s data, 28 hedge funds were long CNH Industrial N.V. (NYSE:CNHI) at the end of Q3 2022, compared to 25 funds in the last quarter. Harris Associates is the largest position holder in the company, with approximately 98 million shares worth $1.11 billion.
Here is what Oakmark Fund specifically said about CNH Industrial N.V. (NYSE:CNHI) in its Q2 2022 investor letter:
“We sold our position in Iveco Group (Italy), in favor of names that, in our opinion, offer a more favorable risk/return profile. Iveco Group’s arrival in the Fund stemmed from CNH Industrial N.V. (NYSE:CNHI)’s demerger of its trucks and commercial vehicles business in early January. We continue to hold CNH Industrial as we believe it holds an attractive valuation at its current price.”
Number of Hedge Fund Holders: 29
The Scotts Miracle-Gro Company (NYSE:SMG) provides lawn fertilizers, grass seed products, spreaders, weed, pest, and disease control products, mulch, and water-soluble and continuous-release plant foods. It is one of the premier farmland and agriculture stocks to invest in. The Scotts Miracle-Gro Company (NYSE:SMG) distributed a $0.66 per share quarterly dividend to shareholders on December 9. The dividend yield on December 26 came in at 5.53%.
On November 8, Barclays analyst Gaurav Jain upgraded The Scotts Miracle-Gro Company (NYSE:SMG) to Overweight from Equal Weight with an unchanged price target of $75. The analyst expects The Scotts Miracle-Gro Company (NYSE:SMG) to “delever rapidly from here,” despite a broad range of macro cases. Over the next three years, the company should deliver $6-$8 per share in free cash flow, the analyst told investors in a research note. He cited the stock’s 16% free cash flow yield for the upgrade.
According to Insider Monkey’s third quarter database, The Scotts Miracle-Gro Company (NYSE:SMG) was part of 29 hedge fund portfolios, up from 25 in the last quarter. Jean-Marie Eveillard’s First Eagle Investment Management is the largest stakeholder of the company, with 1.5 million shares worth $67.3 million.
Number of Hedge Fund Holders: 37
Archer-Daniels-Midland Company (NYSE:ADM) was founded in 1902 and is headquartered in Chicago, Illinois. The company procures, transports, processes, and merchandises agricultural commodities in the United States, Switzerland, Cayman Islands, Brazil, Mexico, the United Kingdom, and internationally. Archer-Daniels-Midland Company (NYSE:ADM) operates through three segments – Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition.
On October 25, Archer-Daniels-Midland Company (NYSE:ADM) reported its Q3 results. The company posted non-GAAP earnings per share of $1.86, beating Wall Street estimates by $0.45. Revenue over the period came in at $24.68 billion, up 21.3% year-over-year, outperforming market consensus by $2.47 billion. Archer-Daniels-Midland Company (NYSE:ADM) also paid a $0.40 per share quarterly dividend to shareholders on December 7.
UBS analyst Manav Gupta initiated coverage of Archer-Daniels-Midland Company (NYSE:ADM) on December 14 with a Buy rating and a $115 price target. The analyst sees Archer-Daniels-Midland Company (NYSE:ADM) reporting earnings of $7.75 per share by 2026 when considering its productivity and innovation efforts, even in a normalized margin environment, the analyst told investors. He estimates earnings bottoming at $6.07 per share, which the analyst said is “well above” present normalized earnings levels of $4.50 per share.
According to Insider Monkey’s data, Archer-Daniels-Midland Company (NYSE:ADM) was part of 37 hedge fund portfolios at the end of Q3 2022, compared to 42 in the last quarter. Tom Gayner’s Markel Gayner Asset Management held the biggest position in the company, comprising 1.46 million shares worth $117.7 million.
In addition to The Mosaic Company (NYSE:MOS), Bunge Limited (NYSE:BG), and Deere & Company (NYSE:DE), Archer-Daniels-Midland Company (NYSE:ADM) is one of the premier agriculture stocks to invest in.
Here is what Diamond Hill Long-Short Fund has to say about Archer-Daniels-Midland Company (NYSE:ADM) in its Q1 2022 investor letter:
“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”
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Disclosure: None. 11 Best Farmland and Agriculture Stocks To Buy Heading Into 2023 is originally published on Insider Monkey.
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