Amid a major crisis fueling concerns about global food security, investing in agriculture stocks – while perhaps cynical – almost invariably present a hedge against market uncertainty. As the Council on Foreign Relations mentioned, Russia killed the Black Sea Grain Initiative, a deal that saw Russia easing its military blockade of Ukraine’s Black Sea ports. The deal was critical in exporting Ukrainian grain, oilseed, and fertilizer.
Brokered by the United Nations and Turkey, the deal represented a tiny bright spot in an otherwise horrific conflict. While talks are ongoing to get the deal back on track, Russia’s invasion of Ukraine – and the subsequent wave of support by Western allies – complicates matters. For now, the world faces an artificial wheat shortage, which will likely bolster the best agriculture stocks.
Again, it’s a cynical framework. However, outside observers must also understand that the Russian government has callously exercised cynicism to weaken support for Ukraine. Essentially holding critical commodities hostage is part and parcel of the Kremlin’s game plan. Therefore, the ugly reality of the situation dictates at least consideration of wheat shortage stocks.
Agriculture Stocks: Bunge (BG)
Headquartered in St. Louis, Missouri, Bunge (NYSE:BG) is an agribusiness and food company. According to its public profile, beyond its international soybean export business, Bunge specializes in food processing, grain trading, and fertilizer. Since the start of the year, BG moved up alongside many other names for best agriculture stocks, gaining nearly 10%. Most of the enthusiasm came within the past 30 days.
Financially, Bunge benefits from a pertinent business profile that yields a three-year revenue growth rate (per-share basis) of 14.7%. This stat ranks better than nearly 74% of companies listed in the consumer packaged goods industry. Also, it printed nine years of profitability in the trailing decade.
Despite being one of the wheat shortage stocks rising from the largely artificial crisis, the market prices BG at forward earnings multiple of 9.29. In sharp contrast, the sector median stat comes in at a much loftier 16.61x.
Finally, while it’s not the most generous source of passive income, Bunge carries a forward yield of 2.53%. Overall, BG deserves consideration for those investing in agriculture stocks.
Though not a direct player among the best agriculture stocks, Deere (NYSE:DE) as a manufacturer of agricultural machinery and heavy equipment deserves careful consideration. Crisis or not, Deere represents an important cog in the broader food supply chain and infrastructure. However, it may be a key beneficiary of recent geopolitical events.
At the end of May of this year, DE was printing a year-to-date loss. However, in the trailing one-month period, DE gained slightly over 8%. Overall, shares have returned 3% since the January opener. It’s not exactly impressive but it’s a lot better than being underwater.
For astute investors of stocks benefitting from wheat shortage cycles, Deere offers an intriguing idea. Presently, the company prints a three-year revenue growth rate of 11.8%, above nearly 68% of the competition. Also, it’s consistently profitable, posting a strong trailing-year net margin of 15.25%.
Analysts also peg DE as one of the best agriculture stocks, rating it a consensus moderate buy. The high side price target clocks in at $530, implying over 21% upside potential.
Another high-flying example for those investing in agriculture stocks, Adecoagro (NYSE:AGRO) is involved in a range of businesses, including farming crops and other agricultural products, dairy operations, sugar, ethanol and energy production, and land transformation. Since the start of the year, AGRO gained almost 42%, an impressive tally. In the trailing one-year period, shares moved up just over 37%.
On the surface level, AGRO seems well overheated. However, the company trades at a price/earnings-to-growth (PEG) ratio of 0.77X. In contrast, the sector median stat stands at a loftier 1.74X. Also, the market prices Adecoagro at a tangible book multiple of 1.02. This stat comes in lower than 68.7% of its peers, again incentivizing a speculative shot.
Interestingly, the company carries a forward yield of 3.04%, which is quite attractive. Also, with a payout ratio sitting at 31.92%, investors have confidence in yield sustainability. However, analysts only peg AGRO as a hold. Their average price target is only $11.50, implying under 8% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.