Agriculture stocks have been in the limelight in recent months. Due to supply chain problems, increasing energy costs, and rising global demand, food prices continue to soar. Moreover, economists suggest that food prices will remain elevated throughout 2022, further fueling inflation. In January, food inflation in the U.S. hit 6.7%, the highest number we have seen since February 1990.
The United States Department of Agriculture’s (USDA) latest farm income report estimates net farm income increased by $23.9 billion in 2021, a 25% year-over-year (YOY) increase. Put another way, tightening global supplies and strong demand from China and Europe has resulted in rising commodity prices. This increase has, in turn, benefited the agriculture sector, driving up revenues.
As a result, agriculture stocks with price-setting power are ideally positioned for a bull market this year. They will benefit from the ongoing inflationary pressures while passing on costs to customers. The ongoing war in Ukraine will also put focus on food supplies worldwide.
For instance, the iShares MSCI Agriculture Producers ETF (NYSEARCA:VEGI) just today, March 3, hit an all-time high of $44.12, up 12% over the past year. The fund is currently trading near its peak value. And Ukraine and Russia export a combined 29% of the world’s wheat.
With that said, here are seven agriculture stocks that could generate lucrative returns in 2022.
- Andersons (NASDAQ:ANDE)
- AppHarvest (NYSE:APPH)
- Deere (NYSE:DE)
- Mosaic (NYSE:MOS)
- Nutrien (NYSE:NTR)
- Scotts Miracle-Gro (NYSE:SMG)
- Tyson Foods (NYSE:TSN)
Agriculture Stocks: Andersons (ANDE)
52-week range: $25.07 – $48.38
Dividend Yield: 1.50%
Maumee, Ohio-based Andersons is an agribusiness conglomerate providing vital goods and services for the agriculture industry. The company produces and distributes grain, ethanol, plant nutrients, and rail cars.
Andersons announced fourth quarter 2021 results on Feb. 15. Revenue increased 51% YOY to $3.78 billion. Adjusted net income came in at $39.2 million, or $1.14 per diluted share, up from $18.5 million in the prior-year quarter. Cash and equivalents ended the period at $216.4 million.
The company is ideally positioned in the agricultural supply chain to benefit from rising food prices. Management predicts solid margins from its nutrient segment, resulting from limited supply and well-positioned inventory through the spring season. Andersons is also making headway in renewable diesel, benefiting from higher energy demand and a return to environmentally friendly ethanol.
ANDE stock hit a multi-year high of $48.38 today, March 3. It currently hovers at its peak value, up 72% over the past year. Shares are trading at 17 times forward earnings and 0.13 times trailing sales. The 12-month median price forecast for Andersons stands at $46.50.
52-week range: $2.62 – $29.17
Morehead, Kentucky-based AppHarvest is an agriculture company that develops and deploys indoor farms. The group aims to transform itself into a “farming as a service” business model.
AppHarvest shared Q4 2021 results on Feb. 24. Revenue came in at $3.1 million. Net loss widened to $88.4 million, or 88 cents loss per diluted share, up from $9.3 million in the prior-year quarter. Cash and equivalents ended the period at $151 million.
In 2021, AppHarvest acquired Root AI, a robotics company licensing its technology to other farmers. Yet, management doesn’t expect its robotics business to generate any revenue this year. As a result, AppHarvest needed a massive $60 million goodwill charge to write down this investment.
APPH stock is priced at $3.82, down 88% over the past 12 months. The 12-month median price forecast for Appharvest stands at $6.
Agriculture Stocks: Deere (DE)
52-week range: $320.50 – $400.34
Dividend Yield: 1.12%
Moline, Illinois-based Deere is a leading global producer of agricultural equipment. Deere employs artificial intelligence (AI) and computer vision applications to boost yields and reduce costs. The final aim is to enhance sustainability in agriculture.
Deere delivered first quarter 2022 metrics on Feb. 18. Revenue saw an increase of 5% YOY to $9.6 billion. However, the company suffered from high input costs due to rising inflation and supply chain issues. As a result, net income fell by 26% YOY to $903 million, or $2.92 per diluted share.
Roughly 71% of Q1 revenue came from agriculture. In January, Deere revealed that its new autonomous 8R tractor was ready for large-scale production. Analysts expect autonomous driving to improve free cash flow and profitability in 2023.
In 2017, Deere acquired the Wirtgen Group, a leading global supplier of road construction equipment. This $5.2 billion acquisition will enable the company to capitalize on increased infrastructure spending in 2022.
DE stock trades at $347, almost flat over the past 12 months. Shares are trading at 15.4 times forward earnings and 2.5 times trailing sales. The 12-month median price forecast for Deere stock is at $425.
52-week range: $28.05 – $57.27
Dividend Yield: 0.84%
Our next stock is the Tampa, Florida-based Mosaic. The company is the world’s largest combined producer of potash and phosphates, which are critical fertilizer ingredients.
Mosaic announced Q4 2021 numbers on Feb. 22. Sales increased 56% YOY to $3.8 billion. However, net earnings declined to $665 million, or $1.76 per diluted share, down from $828 million, or $2.17 per diluted share, a year ago.
Due to inflationary pressures and rising prices, the Q4 sales volume of phosphate and potash declined 22% YOY. Yet, the company expects growing demand for fertilizers in 2022.
In addition, management indicated that it already has 85% of Q1 sales committed due to its ability to raise inventories 58% YOY. The Esterhazy K3 potash mine will begin production by Q2 2022, adding 5 million metric tons of potash production through 2022.
MOS stock is around $55, up 79% over the past 12 months. It’s up 42% YTD. Shares have a cheap valuation at five times forward earnings and 1.6 times trailing sales. The 12-month median price forecast for Mosaic is at $50.
Agriculture Stocks: Nutrien (NTR)
52-week range: $52.28 – $90.48
Dividend Yield: 2.29%
Canada-based Nutrien is the largest potash producer and the third-largest nitrogen producer globally. Such production levels makes it the world’s largest fertilizer supplier by capacity.
Nutrien released Q4 2021 financials on Feb. 16. Revenue increased 79% YOY to $7.3 billion. Net earnings skyrocketed to $1.2 billion, or $2.11 per diluted share, up from $316 million, or 55 cents per diluted share, a year ago. Free cash flow during the quarter stood at $1.6 billion.
The company is benefiting from rising prices in crop nutrients. It has four million tons of available potash capacity on top of its current 14 million tons annual capacity. Management announced on Feb. 1 that the company has the potential to increase potash output by 29%.
NTR stock hit an all-time high of $90.48 today, March 3. It currently hovers at its peak value, up 60% over the past year. Shares are trading at 7.3 times forward earnings and 1.67 times trailing sales. The 12-month median price forecast for Nutrien stands at $90.
Scotts Miracle-Gro (SMG)
52-week range: $126.57 – $254.34
Dividend Yield: 1.93%
Marysville, Ohio-based Scotts Miracle-Gro is the largest manufacturer of gardening and lawn care products stateside. In addition, Hawthorne Gardening is its wholly-owned subsidiary offering cannabis-growing equipment.
Scotts put out Q1 FY22 results on Feb. 1. Revenue fell 24% YOY to $566 million. As a result, the non-generally accepted accounting principles (GAAP) loss came in at $48.6 million, or 88 cents per share. In comparison, the company had reported an adjusted net income of $22.2 million, or 39 cents per share, in the prior-year quarter.
SMG is a profitable company with margins above 21%. However, the overproduction of pot in the cannabis industry has led to a decline in sales of hydroponic products. As a result, Hawthorne’s Q1 sales declined 38% YOY to $190.6 million. CEO Jim Hagedorn remarked that the company is considering a spinoff while maintaining a minority position in Hawthorne.
SMG stock trades around $140 territory, down 34% over the past 12 months. Shares have a competitive valuation at 16.5 times forward earnings and 1.64 times trailing sales. The 12-month median price forecast for Scotts Miracle-Gro is at $185.
Agriculture Stocks: Tyson Foods (TSN)
52-week range: $69.77 – $100.72
Dividend Yield: 1.94%
Our last stock for today is Springdale, Arizona-based Tyson Foods, which is the largest producer of processed chicken and beef in the U.S. It is also well-known for its processed pork and protein-based products.
Tyson Foods released Q1 2022 metrics on Feb. 7. Sales increased 24% YOY to $12.9 billion. Net income grew 140% YOY to $1.12 billion, or $3.07 per share, up from $467 million in the prior-year quarter. Cash and equivalents ended the period at $2.96 billion.
Supply chain issues and a tight labor market have led to higher animal feed prices, shipping costs, and wages. Tyson said it will pass on increased costs to customers, which will offset higher feed prices.
InvestorPlace readers might already know that average prices for Tyson’s meat products have soared by double digits. Meanwhile management anticipates generating $51 billion in sales in 2022, representing roughly an 8% YOY growth.
TSN stock is priced at $95, up almost 38% over the past year. Shares are trading at 11.5 times forward earnings and 0.7 times trailing sales. The 12-month median price forecast for Tyson Foods stands at $100.
On the date of publication, Tezcan Gecgil 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.