Food and agriculture stocks can diversify and strengthen a high-risk equity portfolio. Companies involved in the production and distribution of essential goods such as food tend to hold up better in recessions and can pass on rising costs to consumers, which can protect investors from the negative effects of inflation.

Because of these characteristics, the agriculture sector led the broader market during the 2022 selloff, with the Vanneck Agribusiness ETF ( MOO ) down 8% to end the year, compared with a 15% decline for the Russell 1000 index. However, MOO has underperformed the Russell 1000’s 7% gain, as investors’ appetite for risk has returned in anticipation of a slower 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 top names in terms of value, growth and total return in Q2.

Below we look at three of the top agriculture stocks in three categories: best value, fastest growth, and most momentum. All data is as of April 6.

Best value agricultural stock

These are the agriculture stocks with the lowest 12-month trailing price-to-earnings (P/E) ratios. Because returns can be made to shareholders in the form of dividends and buybacks, a low P/E ratio indicates that you are paying less for each dollar of profit generated.

Best value agricultural stock
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 Limited (ICL) 6.42 8.3 3.8

Source: YCharts

  • CVR Partners LP.: CVR Partners is engaged in the manufacture and sale of ammonia and urea ammonium nitrate solution fertilizer products in the United States. The average price of ammonia doubled in 2022, while the price of ammonia nitrate rose 84% year-over-year. Subsequently, CVR Partners’ revenue nearly doubled, with EBITDA of $403 million in 2022 compared to $212 million in 2021.
  • Cal-Maine Foods: Cal-Maine handles the production, packaging, marketing and distribution of shell eggs for supermarkets, distributors and consumers throughout 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 more than double, from less than $2 in January to nearly $5 a dozen in December. Cal-Maine’s bottom line grew eightfold in the quarter ended Feb. 25.
  • ICL Group Limited: ICL is a specialty chemical and mineral producer focusing on potash and phosphate products and their by-products. Like CVR, ICL capitalized on higher potash prices in 2022, generating sales growth of 44% and EBITDA growth of 137%.

The fastest growing agricultural stock

These are the top agriculture stocks 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 important factors in a company’s success. Therefore, ranking companies by only one growth metric makes them susceptible to quarterly accounting anomalies (such as changes in tax laws or restructuring costs) that may not be representative of the business in general for one person or another.

Companies with quarterly EPS or revenue growth greater than 1,000% were excluded as outliers.

The fastest growing agricultural stock
price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Cal-Maine Foods Inc (CALM) 55.70 2.7 717 109
Chemical and Mining Society of Chile SA (SQM). 73.36 21 258 189
Deere & Co (DE) 369.65 109 124 32

Source: YCharts

  • Cal-Maine Foods: See company details above.
  • Chemical and Mining Society of Chile SA: SQM is a leading global producer of industrial chemicals, lithium, and plant nutrients. SQM experienced exceptionally strong demand for lithium in the fourth quarter of 2022, primarily from the Chinese electric vehicle sector, resulting in lithium revenue increasing 771% year over year.
  • Deere & Co.: Deere is a global leader in the manufacture of all equipment related to agriculture as well as construction, forestry, earthmoving and lawn/turf care. Led by strong demand, higher shipments and real prices, Deere posted year-over-year net sales and EPS growth of 34% and 124% for Q1, while guiding for 2023 net income in the $8.75B to $9.25B range, compared to $7.7B in 2022. 1 billion.

Agricultural stocks with the most speed

These are the agricultural stocks that had the highest total returns in the last 12 months.

Agricultural stocks with the most speed
price ($) Market Cap ($B) Total return after 12-months (%)
Performance Food Group Co (PFGC) 60 9.4 23
Toro Co (TTC) 100.98 10.5 23
Fresh Del Monte Products Inc. (FDP) 30.26 1.5 20
Russell 1000 N/A N/A -9
VanEck Vectors Agribusiness ETF (MOO) 84 N/A -21

Source: YCharts

  • Performance Food Group Co.: Performance Foods Group is engaged in the marketing and distribution of grocery, frozen foods, beverages, cigarettes, meat, seafood, and health and beauty products. It also sells cleaning supplies and provides value-added services such as operational strategy and menu development. Its customers include retailers, hospitals, restaurants, airports, bookstores, and theaters. Experiencing strong sales momentum, Performance Foods Group recently raised its adjusted EBITDA guidance for 2023.
  • Toro’s: 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 grow profits across the enterprise in the first quarter of 2023.
  • Fresh Del Monte Products Inc: Fresh Del Monte is a vertically integrated producer, marketer, and distributor of fresh fruits and vegetables worldwide. In the final quarter of 2022, net income doubled to $81.7 million on 2% revenue growth and an increase in profit margins, as the company was able to set higher prices based on inflationary conditions.

Benefits of agricultural stock

One of the biggest advantages of agricultural investment is that people always need to eat, so the industry will generally have steady demand. As a result, some investors see the 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 some agricultural stocks can provide passive income through regular dividend payments. Additionally, agricultural land investments may be able to provide a hedge against rising inflation.

Risk of agricultural stocks

Agriculture and the agricultural sector as a whole can be unpredictable for investment, as it is subject to many risk factors. Uncertainties ranging from weather to government policies to global commodity markets can lead to volatile prices and changes in earnings that affect these types of investments. Here are some of the risks inherent in agricultural investments:

  • Product risk: Major weather events, crop diseases, and other factors can affect the quantity and quality of produce.
  • market risk: Global markets for commodities can affect farms and agribusinesses because prices can swing suddenly, causing uncertainty in crop production and agribusiness demand.
  • Financial risk: Farms and related businesses often use debt to fund operations, so rising interest rates and tightening credit can be a shock to companies in the industry.
  • Regulatory risk: Changes in taxes, regulations, subsidies, and other government moves can also have a negative, or positive, impact on agricultural businesses and investments.

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