3 Agricultural Stocks That Will Benefit From Higher Food Prices

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Food prices have been rising at an accelerated rate since the beginning of this year, due primarily to crop failures in China and a consequent increase in demand for agricultural commodities from the world’s largest consumption-driven economy. This, together with rising raw material costs and global supply chain disruptions, has resulted in a 2.4% year-over-year rise in food prices, as of April 2021, according to the Bureau of Labor Statistics.

The rising demand for agricultural commodities requires an equivalent rise in supply to stabilize prices. Rising prices will no doubt incentivize agricultural companies to produce more. Consequently, the global agricultural equipment market is expected to grow at a 5.6% CAGR over the next three years to hit $265.90 billion by 2025.

Given this backdrop, we think the stocks agricultural equipment and supply companies Deere & Company (DE), The Mosaic Company (MOS), and AGCO Corporation (AGCO) should continue advancing in the coming months.

Deere & Company (DE)

DE is engaged in the manufacture and distribution of equipment used in agriculture, construction, forestry, and turf care. It also offers wholesale financing to dealers of the equipment, extended equipment warranties, as well as retail revolving charge accounts.

On May 10, DE redefined its 5M Series Tractor lineup by introducing new technology and transmission options, and more top-end horsepower with the addition of a new 125-horsepower tractor. Its integrated AutoTrac guidance helps operators reduce inputs, such as fuel, seed, and fertilizer, by minimizing overlap in straight line applications in the fields, thus reducing costs significantly. The company expects this redefined lineup to generate good sales and good revenues.

In collaboration with Full-Tree Forestry teams, on April 22, DE added Smooth Boom Control (SBC) technology to its M-Series Tracked Feller Bunchers and MH-Series Tracked Harvesters, to enhance machine operations in forestry applications. Ensuring responsive hydraulic function actuation, this technology improves overall machine reactiveness and controllability.

For its fiscal 2021 first quarter, ended January 31,  DE’s total net sales and revenues increased 19.4% year-over-year to $9.11 billion. The company’s total operating profit came in at $1.64 billion, which represents a 154% year-over-year rise. Its net income is reported to be $1.22 billion, up 136.8% from the prior-year period. Its EPS increased 137.4% year-over-year to $3.87.

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