- Agriculture stocks have gained significant momentum in recent years as investors recognize the sector’s potential and stability.
- Canada exports C$82.2 billion a year in agriculture and agri-food products and is the fifth largest exporter of agricultural and agri-food products in the world after the European Union, United States, Brazil, and China
- Agriculture is highly susceptible to weather patterns and climate change, making it a volatile industry for investors
- The agriculture sector is undergoing a rapid transformation with advancements in technology and innovations such as precision farming, genetic engineering, and data analytics
Agriculture stocks have gained significant momentum in recent years as investors recognize the sector’s potential and stability. Canada, known for its vast farmlands and thriving agricultural industry, provides a lot of opportunities for investors to capitalize on the growth of this sector.
Agricultural stocks are companies that produce and sell foodstuff commodities, such as wheat, livestock, sugar, soybeans, corn, etc. and includes business involved in fertilizer, packaged foods, along with agricultural machinery and equipment.
Canada exports C$82.2 billion a year in agriculture and agri-food products and is the fifth largest exporter of agricultural and agri-food products in the world after the European Union, United States, Brazil, and China. Around half of everything produced is exported as either primary commodities (grains, oilseeds, meat, dairy, etc.), or as processed food and beverage products.
When it comes to investing, agriculture stocks often remain an overlooked sector. However, with global food demand predicted to rise by 70 per cent by 2050, investing in agricultural companies is proving to be an enticing opportunity.
In this article, we will explore some of the top Canadian agriculture stocks that are worth considering for your investment portfolio.
Top Canadian agriculture stocks
5: Village Farms International Inc. (NASDAQ:VFF) (Market cap: C$120.70 million is based out of Vancouver and focuses on producing premium-quality, greenhouse-grown vegetables, primarily tomatoes, bell peppers and cucumbers. The company leverages its advanced technology and sustainable farming practices to deliver year-round supplies of fresh produce. With the increasing demand for locally produced, sustainable food, Village Farms International stands out as an attractive investment option.
Its Canadian cannabis retail branded sales increased 24 per cent year-over-year in Q2 2023 at C$56.5 million, significantly outpacing market growth.
Village Farms International last traded at $ per share and is up 30.7 per cent over the past three months.
4: Ag Growth International Inc. (TSX:AFN) (Market cap: C$1.07 billion) is a leading manufacturer of portable and stationary grain handling, storage and conditioning equipment. The company caters to Canadian and international markets, providing innovative solutions to farmers worldwide. With a diverse product portfolio and a strong foothold in the industry, Ag Growth International has witnessed consistent growth over the years and offers a promising investment opportunity.
The company recently reported its Q2 2023 financial performance at C$390 million, consistent on a year-over-year basis. This led its leadership team to raise its full year 2023 Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) guidance to be at least C$290 million, up from our previous guidance of at least C$265 million.
Ag Growth International Inc. last traded up nearly 7 per cent at $0.76 per share.
3: Maple Leaf Foods Inc. (TSX:MFI) (Market cap: C$3.39 billion) is a leading consumer protein company that specializes in producing and selling high-quality meat products. With a solid portfolio that includes popular brands such as Maple Leaf, Schneiders and Prime, the company caters to domestic and international markets. Maple Leaf Foods has consistently focused on sustainability and animal welfare, aligning with the shifting consumer preferences towards ethical sourcing. This commitment, coupled with its dominant market presence, positions the company as a serious choice for investors.
In recent company news, its total sales grew 6.2 per cent to C$12.6 million in Q2 2023, with an EBITDA margin of 8.1 per cent.
Maple Leaf Foods Inc. last traded up 2 per cent at C$25.96 per share.
2: Saputo Inc. (TSX:SAP) (Market cap: C$12.03 billion) is one of the top 10 dairy processors in the world. The company produces, markets and distributes a wide array of dairy products, mostly focused on cheese. Saputo also produces, markets and distributes a range of dairy alternative cheeses and beverages. Saputo products are sold in several countries under market-leading brands, as well as private label brands.
In its fiscal Q1 2024 (a period that ended at the same time as the previous three companies’ Q2), Saputo saw its net earnings total C$141 million, up from C$139 million a year ago.
Saputo Inc. last traded up 1.2 per cent at C$28.19 per share.
1: Nutrien Ltd. (TSX:NTR) (Market cap: C$41.69 billion) is the world’s largest provider of crop inputs and services, including fertilizers, crop protection products and digital farming solutions. This company operates a vertically integrated business model, capturing various stages of the agricultural value chain. Nutrien’s robust market presence, extensive distribution network, and commitment to sustainable practices make it a top pick for investors looking to tap into the agricultural sector.
In a news release on its Q2 2023 financial results, Nutrien President and CEO Ken Seitz acknowledged that unprecedented volatility in global crop input markets over the past 18 months has impacted the company’s bottom line.
“We are announcing a number of strategic actions to reduce our controllable costs and enhance free cash flow in 2023 and beyond. This includes an indefinite pause of our potash ramp up and suspension of work on our Geismar clean ammonia project. These actions, along with other operational efficiency initiatives, demonstrate our commitment to disciplined capital allocation and focus on long-term value creation,” he said.
Nutrien generated net earnings of US$1.0 billion and adjusted EBITDA of US$3.9 billion in the first half of 2023, down significantly from the record levels achieved in the first half of 2022. The company pointed blame to lower net realized fertilizer prices, offshore potash sales volumes, and Nutrien Ag Solutions retail earnings.
Nutrien Ltd. last traded up nearly 2 per cent at C$79.91 per share.
- Stantec Inc. (TSX:STN) – Market cap: C$9.73 billion, previous close: C$88.99 per share
- SunOpta Inc. (TSX:SOY) – Market cap: C$541.0 million, previous close C$4.53 per share
- CubicFarms Systems Corp. (TSX:CUB) – Market cap: C$7.0 million, previous close $0.03 per share
While investing in agriculture stocks can yield significant returns, like any investment, it carries certain risks that potential investors should carefully consider. Here are some of the risks associated with investing in agriculture stocks and a few insights to help investors make informed decisions.
Weather and climate-related risks
Agriculture is highly susceptible to weather patterns and climate change, making it a volatile industry for investors. Extreme weather events such as droughts, floods or freezes can cause substantial damage to crops and livestock, leading to reduced yields and financial losses for agricultural companies.
On top of this, climate change poses a long-term risk as shifting weather patterns and unpredictable climatic conditions may disrupt traditional agricultural practices. Investors should be aware of these risks and assess how companies are adapting and mitigating such challenges.
Price volatility and commodity risks
Investing in agriculture stocks can expose investors to price volatility and commodity risks. Commodity prices for products such as grains, livestock, and dairy can fluctuate significantly because of various factors such as supply and demand, weather conditions, global trade policies and geopolitical events. These price fluctuations can impact companies’ revenue, profitability and stock performance. Investors should carefully analyze how companies manage these price risks and the strategies they employ to protect against such fluctuations.
Biological and farming risks
The vulnerability of agricultural production to pests, diseases and invasive species poses another significant risk for investors. Insects, plant diseases or invasive weeds can devastate crops, leading to substantial losses for companies. Just like in the livestock sector, the outbreak of diseases can result in widespread damage and economic losses. Understanding how agricultural companies manage these biological risks, their contingency plans, and investments in research and development is crucial for investors assessing their long-term potential.
Market and trade risks
Agriculture is highly influenced by global markets and international trade policies, which can have a considerable impact on companies’ financial performance. Changes in tariffs, import/export regulations, or trade disputes between countries can disrupt supply chains, affect market prices and limit market access for agricultural products.
The United States is Canada’s top trading partner, accounting for around 60 per cent of all agri-food and seafood exports and more than half its imports. Canada has had to appease U.S. interests in the past while prioritising its own interests.
Investors should consider the potential impact of such market and trade risks on the companies they are evaluating and analyze their ability to navigate through these challenges successfully.
Technological and innovation risks
The agriculture sector is undergoing a rapid transformation with advancements in technology and innovations such as precision farming, genetic engineering and data analytics. While these innovations offer immense potential, investing in agriculture stocks also entails risks associated with the adoption and implementation of new technologies. Understanding how companies embrace technology, adapt to evolving consumer demands, and navigate regulatory frameworks is essential for investors looking to capitalize on these opportunities while managing associated risks.
Exploring opportunities in the growing industry
The Canadian agricultural sector offers a range of investment opportunities, driven by its extensive farmlands, advanced technology, and commitment to sustainability. Ag Growth International, Nutrien, Village Farms International, Saputo, and Maple Leaf Foods are just a few examples of the top agriculture stocks worth considering.
Investing in agriculture stocks can be a rewarding venture, given the increasing global demand for food and evolving agricultural practices. However, it is crucial to be aware of the risks associated with this sector. Weather and climate-related risks, price volatility, biological risks, market and trade risks and technological challenges are factors investors should evaluate before making investment decisions.
By conducting thorough research and due diligence, understanding companies’ risk mitigation strategies, and diversifying portfolios, investors can better navigate these risks and make informed investment choices in the agriculture sector.
As the world continues to prioritize food security and sustainable farming practices, these stocks present attractive prospects for investors seeking exposure to the thriving Canadian agriculture industry.
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