The rural farmlands of the agriculture industry are closely tied to Wall Street. With almost 7 billion people in the world to feed, the agricultural industry has become highly advanced over the years, giving investors a great windfall in the form of growing stock values and dividends.
Top Agriculture Companies in the World
The agricultural industry is probably the oldest business in history. Everyone needs to eat food, and that food comes from a farm that requires machinery, services, pesticides, and genetic engineering to function efficiently.
When it comes to the demand for corn and soybean crops, most people think of trading futures on the commodities market. But there’s a whole market of agriculture stocks to buy issued by companies that are not actually farming commodities. Instead, these agriculture stocks are issued by companies that manufacture chemical fertilizers or create genetically modified seeds.
Many agricultural companies attempt to make farming profitable for those who grow corn, wheat, or soybean crops in the soil or cultivate orchards of fruit or nuts. Agriculture stocks reap cash flow harvests in the process, and in turn pass that success on to investors.
Thousands of years ago, mankind transitioned from gathering berries and hunting wild game into planting seeds in arable land, waiting for them to grow, and then harvesting fruits, vegetables, and grains to make food. Somewhere along the line, they also figured out how to domesticate certain animal species, which they could use for meat, milk, and labor.
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From its very inception, agriculture was a business that required technological development to make it efficient. The wheel, the plow, the scythe, and the mill were some early inventions that sped up the farming process and created greater yields. In the Middle Ages, the discovery of new plants from the new world (what would Italian food be without tomatoes) and new techniques like crop rotations revolutionized the industry.
But the real revolution came with the greater Industrial Revolution, which created new possibilities for mechanization—using machines to make processes easier. The cotton gin, the gasoline-powered tractor (with rubber tires), the combine harvester, and synthetic pesticides opened up new vistas in agricultural productivity, while also making the inventors of these devices and the companies that manufactured them very wealthy.
Another impactful revolution occurred in the latter half of the 20th century, as pharmaceutical and chemical companies that manufactured agrochemicals began to dabble in genetic engineering and modified seed production. While controversial, these practices have become part of global food production and yielded good profits for the companies involved.
Top Agriculture Companies in the World
Here are some of the hottest agricultural companies to watch, although not all of them are publicly traded at this time.
Cargill is a family-owned business that is not publicly-traded, but it’s the largest privately-held American company in terms of revenue, at almost $115 billion in 2019. It would be 15th on the Fortune 500 list if it were public. Cargill’s primary business activities involve a number of activities in the agriculture and supply chain industry. Cargill purchases and distributes agricultural commodities like grain, palm oil, starch, syrup, and other materials used in processed foods. Around 25% of US grain exports are managed by Cargill, and every single egg used by McDonald’s is processed by Cargill. Cargill is also involved in energy, steel, transportation, and financial services.
Corteva Inc. (NYSE: CTVA)
Corteva Inc. (NYSE: CTVA), also known as Corteva Agriscience, was formerly the agricultural branch of DowDuPont. In 2019, this leading global chemical manufacture was broken up into several companies, which resulted in the formation of Corteva as a public company. Corteva, which is a composite of Latin words for heart and earth, reportedly earned revenues of $14 billion in 2017, although at that time it was still part of DowDuPont.
One of Corteva’s biggest branches is Pioneer Hi Bred International, an American producer of seeds and a major producer of genetically modified organisms like crops. Pioneer began as the Hi-Bred Corn Company in 1926, which experimented with creating a hybrid corn seed.
The story of Corteva’s once-parent company, DowDuPont, is most likely somewhat familiar to consumers. Dupont was founded in 1802 as a gunpowder mill in Wilmington, Delaware, going on to develop synthetic polymers like nylon, Corian, Teflon, Kevlar, and others. Dupont also developed Freon, which makes refrigeration possible. In 2017 Dupont merged with Dow Chemical, and subsequently engaged in spinoffs of select components of their business, which included Corteva.
Syngenta AG is a Swiss-based company that produces agrochemicals and seeds. However, it is actually a subsidiary of ChemChina, a state-owned Chinese company that is also not publicly traded. Since Syngenta is involved in biotech, it also conducts genetic research. Syngenta was formed just two decades ago in a merger between Swiss pharmaceutical company Novartis and London pharmaceutical company Zeneca.
As of five years ago, Syngenta had already become the world’s largest producer of crop chemicals, and third largest in terms of seed and biotech sales. Much of its nearly $13 billion revenue comes from emerging markets, although it is actively involved in the science of optimizing crop yields in already developed countries, such as the United States. Syngenta claims that 25% of the corn seeds sold in the United States are its proprietary triple stack corn.
Bayer AG (FWB: BAYN)
Bayer AG (FWB: BAYN) is a German pharmaceutical and life sciences company that is also involved in agrochemical development and sales, seeds, and biotechnology products. Bayer was once part of IG Farben, a large conglomerate of six companies. IG Farben’s claim to fame was the development of Aspirin. Bayer was spun off as its own company and continued developing a variety of pharma and chemical products, some of which were specifically for agriculture. Bayer’s fungicides are primarily for grains and its herbicides are used for orchards and field crops. Bayer is also involved in seed production and genetic modification through Bayer Crop Science, which has expanded by acquiring other seed companies in Europe.
CNH Industrial N.V. (NYSE: CNHI)
CNH Industrial N.V. (NYSE: CNHI) designs, manufactures, and sells agricultural equipment, along with construction equipment and specialty vehicles. CNH is actively involved in markets around the world, focusing on high-growth markets. CNH builds tractors, combine harvesters, and other types of specialty farming equipment for hay production and foraging.
Its two main branches manufacturing agricultural machinery are New Holland Agriculture and Case IH. New Holland Agriculture is an acquired company that was started in Pennsylvania in 1895 and once owned by Ford.
Case IH was formed in 1985 when automotive parts manufacturer Tenneco acquired select assets from International Harvester. CNH also owns Steyer, a company that focuses on manufacturing tractors for farming, forestry, and even municipal use. CNH equipment is sold through its network of 11,500 dealers across 170 countries, including 12 dealerships in the United States owned directly by CNH—which reported revenues of $28 billion in 2017.
BASF SE (FWB: BAS)
BASF SE (FWB: BAS) is a German chemical producer. It is the largest in the world with subsidiaries and partnerships in over 80 countries worldwide and customers in almost 200 countries. Despite its massive size, impact, and revenues of almost $70 billion, BASF has flown under the radar of public attention ever since it discontinued its manufacture of consumer electronics in the 1990s.
Currently, BASF is expanding its operations into Asia, investing billions of Euros to build up sites near Nanjing, Shanghai, and Mangalore. BASF stands for Badische Anilin und Soda Fabrik, which began as a company that manufactured dyes, sodium carbonate, sulfuric acid, and ammonia. BASF merged with several other companies to form IG Farben, but this company was disbanded by allied forces after WWII.
BASF is involved in many types of chemical production, but in terms of agriculture, it produces fungicides, herbicides, pesticides, and other treatment products for seeds, along with engaging in research about the relation of the human genome to nutrition and partnering with companies like Monsanto to develop genetically modified foodstuffs.
Monsanto | Bayer (FWB: BAYN)
Monsanto is now a subsidiary of Bayer (FWB: BAYN) after it was acquired in 2018 for $66 billion. It was once a publicly-traded company in its own right, producing agrochemicals and biotech. Monsanto began in 1901 as a company manufacturing food additives, such as saccharine and caffeine. The company eventually expanded into the production of other chemicals and pharmaceuticals. Monsanto’s claim to fame was the development of Roundup in the 1970s. Roundup is a synthetic herbicide that is the most widely used herbicide in the United States, despite competition from Chinese companies, providing Monsanto with 10% of its revenue. The consumer-facing version of this product is labeled as Scotts Miracle-Gro.
Monsanto was one of the first companies to develop and test out genetically modified crops in the 1980s. Through the 1990s, Monsanto began to spin off its agrochemical components to focus on biotech. Monsanto has been involved in controversies with agrochemicals such as DDT, Agent Orange, and bovine growth hormones, though Monsanto has attempted to curtail impediments to their R&D through active lobbying.
Many of the names on this list are not so familiar to retail investors, and if they are, the agricultural components of the business are not consumer-facing. Some of the players in the agriculture industry are involved in cutting edge technologies that usually permeate lists of dollar stocks, but these agriculture and pharmaceutical companies have been in business for a long time. The risk of their research to consumer investors is minimal because the companies can afford it. That said, these companies are not for traders looking for cheap stocks to buy now. In fact, some of these companies are not even publicly traded.
However, looking for the best stocks to buy and making an investment in any type of market successfully requires a detailed analysis of factors like market capitalization, dividend yield, and earnings per share. Navigating the world of agricultural stocks in a profitable manner can be difficult. A retail investor might think a company looks good, only to watch it become one of the biggest stock losers.
Those looking to benefit from this business might consider buying shares of an Agricultural ETF, which is a cross between a stock and a mutual fund. Like a mutual fund, an ETF contains a pool of diversified investments. Like a stock, consumers buy shares of an ETF, instead of contributing money.
One of the most interesting ETFS in agriculture is the Defiance Next Gen Food and Agriculture ETF (DIET). It is focused on companies that pledge to provide a sustainable, environmentally-friendly and resource-savvy food supply. The holdings follow the BlueStar Food and Agriculture Sustainability Index (BFOOD), which tracks companies involved with seed modification, water management, and alternatives to meat.
Is Investing in Agriculture Stocks a Good Idea?
Food is one business mankind will also need. With the world’s population growing against a backdrop of shrinking resources, it’s likely that genetic modification will play an increasing role in food security. This means that companies involved in the biotech aspects of agriculture are poised to reap in big harvests of profits with potential dividends—which is good news for investors with a forward-thinking dividend investing strategy.
The genetic modification scene within the agriculture industry is still somewhat new, and we have yet to see how it will unfold. Additionally, controversies and sometimes catastrophes involving pesticides can negatively impact a company’s image and earnings, so it’s probably best to diversify with different types of securities in your stock portfolio. Some of those other stocks could even be consumer staples, such as grain stocks like General Mills or companies that are involved with making food instead of fertilizer.
Products like fertilizer, pesticide, and genetic modification are increasingly necessary in a globally connected world with a limited amount of soil. Agriculture companies are also likely to be at the forefront of developing economies like those in Sub-Saharan Africa, which will only increase the operating cash flow of these companies.
Now might be a great time to get in with companies poised to grow the next generation of crops, especially because many of them (Corteva, Bayer, CNH Industrial) are priced so low (at the time of this article. Just make sure to stabilize your portfolio with more tested venues, such as consumer staples and financials.
Companies Mentioned in This Article
Dividend stocks are always in fashion. Income investors find that dividend stocks can be a replacement for low-yielding Treasury bonds and other bond options. But dividend stocks can also play a role in the growth investor’s portfolio. Dividend stocks by nature tend to lag behind the broader market. This is due to the nature of the companies that issue dividends. In many cases, these are mature companies who have the liquidity to not only use profits for growth but also to reward shareholders.
However, in a bull market dividend stocks can also provide a significant amount of growth. This can provide investors of all styles with a nice total return. For those that are new to dividend stocks, it’s important to know what to look for in a dividend stock. Yield is important, but it’s not everything.
What you’re looking for is a company that has a proven history of not only issuing dividends but ideally increasing the amount of those dividends on an annual basis.
In this presentation, we’ll highlight eight dividend stocks in various sectors that are the best to buy. And for most of these stocks, they’re a good buy today and well into the future.