2 Agricultural Stocks To Buy With Rising Food Prices

  • All signs point to an agricultural bonanza

  • Only half of the ABCD leaders are publicly-traded companies

  • The trend is your friend in ADM

  • BG is a leader in Brazil

  • Feeding the world is a growth sector for the coming years

The demand side of the fundamental equation has experienced substantial growth over the past two decades. At the turn of this century, approximately six billion people inhabited our planet, each requiring nutrition daily. As of last week’s end, the population has grown by 29% to over 7.74 billion. Each quarter, the world adds around 20 million more mouths to feed.

As food requirements are ever-increasing, agricultural production must keep pace. Technological advances in farming and processing crops into food products have increased output. However, the long-term trends in wheat, soybean, corn, and other agricultural products have displayed higher lows.

Meanwhile, technology cannot overcome the impact of the weather conditions on annual corps. In 2012, drought conditions in the US and other growing regions caused corn and bean prices to rise to all-time highs. Wheat rose to its second-highest price. Since then, bumper crops kept a lid on the leading grain and oilseed futures markets.

Last summer, grain prices began to appreciate. Over the past months, the leading grain and oilseed markets moved to multi-year highs. Beans are back in the teens, wheat is over $6 per bushel, and corn is sitting around $5.40 as the 2021 crop year in the northern hemisphere approaches. While the demand for food in 2021 will be higher than in 2020 as there are more people to feed, the weather will determine the path of least resistance of grain prices.

With prices at the highest levels in years, the prospects for earnings and share price growth for Archer Daniels Midland (ADM - Get Rating) and Bunge Limited (BG - Get Rating) have not been as bullish in quite some time. ADM and BG are companies that are supermarkets in the world.

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