The Ukraine invasion has caused major upheavals across markets. Consumers are most familiar with the effects on the oil market. We are all aware that Russia is a major supplier of oil to the world. The Ukraine invasion has affected supply dynamics in a multitude of ways. That warrants its own discussion, but the end result is that consumers are now paying $4.31 nationally at the pump.
But Russia and Ukraine are important to many other commodity markets, namely wheat. That has resulted in a spike in wheat prices as the Russian invasion of Ukraine has led to the closing of grain ports in the Black Sea. The two countries account for over one-quarter of global wheat exports.
That caused prices to spike to $12 on March 7, a 14-year high. Australia is picking up some of the supply slack which should lead to a steadying of prices. Still, prices are likely to be volatile in the coming period. That’s why investors will be keenly scrutinizing wheat stocks. Higher prices could result in increased share prices.
Here are some of the best wheat stocks to consider.
- Bunge (NYSE:BG)
- MGP Ingredients (NASDAQ:MGPI)
- Andersons (NASDAQ:ANDE)
- Archer Daniels Midland (NYSE:ADM)
- Farmland Partners (NYSE:FPI)
- CME Group (NASDAQ:CME)
- Seaboard Corp. (NYSEAMERICAN:SEB)
Wheat Stocks to Buy: Bunge (BG)
Bunge is an agriculture company that employs more than 23,000 people across 40 countries. Although the company operates across oils, sweeteners, and a broad swath of agriculture, it’s wheat that we’re interested in. Fortunately, Bunge touches on wheat in multiple ways.
The firm supplies milled wheat to foodservice firms, brewers, and bakeries to name a few. Bunge also operates an agribusiness arm that buys and transports raw wheat supplying it as a commodity to end consumers around the world.
It’s important for investors to note that Bunge is a diversified commodity firm. It is not a pure-play wheat company. That has translated to a share price that has steadily increased year-to-date.
Bunge already had a strong 2021. Full-year GAAP earnings-per-share (EPS) figures reached $13.64, up from $12.93 a year earlier. Now that wheat will be in focus, Bunge could certainly run higher throughout 2022.
Investors should also consider that prices for everything are rising. February inflation reached 7.9%, a new high. Bunge deals in a variety of commodities which should translate to stronger top-line figures and likely bottom-line figures as well.
MGP Ingredients (MGPI)
Pundits were well aware that bread prices would also rise in the lead-up to the Russian invasion of Ukraine. And now that Russia has invaded Ukraine that is what we’re seeing. Wheat is expected to be the most impacted food commodity due to the crisis.
The result is that MGP Ingredients will likely fare well in the coming days and weeks as the war continues. MGP Ingredients utilizes wheat in multiple ways. The company makes wheat-based end products that go into our everyday food products. That includes wheat fiber, wheat starch, and wheat protein. These products improve various qualities of the food you and I buy.
And they’re likely to become more expensive. But because demand for staple products like bread is relatively steady, MGP Ingredients can pass that cost on to consumers. That isn’t great for you and me, but it is good for the company’s top-line results.
And that will likely be a good thing for investors. Consider that MGPI stock already carries an average target price of $98.75 and trades just around $80. There’s reason to believe it could fare much better in the near future.
Wheat Stocks to Buy: Andersons (ANDE)
When Andersons released earnings back on Feb. 15, it already set several records; The company reported its best-ever pretax income as did several of its business arms.
Commodity markets including wheat were already seeing higher revenue figures as inflation rippled throughout the market. That is of course getting worse as 2022 wears on. Again, not a great comfort to consumers, but a possible area to capitalize on for investors.
Andersons may set more records in 2022 as at least two of its businesses are in a strong position. Andersons plant nutrient arm posted a record pretax income of $15.9 million in Q4. It should logically see strong demand as domestic producers will seek methods to increase their own production. Further, Andersons Trade Group specializes in the logistics of whole grains. It owns and operates more than 70 grain terminals across the U.S. and Canada.
The company reported EBITDA of $355.2 million in 2021, up from $159.8 million in 2020. That’s the kind of growth that investors seek in any period. That growth could continue throughout 2022 as well based on current global market dynamics.
Archer Daniels Midland (ADM)
Archer Daniels Midland is one of those do-it-all firms to watch as wheat prices rise. It serves customers across the value chain.
Archer Daniels Midland supplies a range of wheat and whole wheat flours along with other milled products that are being affected by the Ukraine invasion. But if you zoom out on Archer Daniels Midland, you’ll see that the company provides agricultural services to farmers, transportation, and basically everything within the wheat value chain.
Same story here: ADM stock had a strong 2021. EBITDA figures reached $4.907 billion, up 34% on a year-over-year basis. That’s a boon to the firm and those figures were calculated far prior to any Russia-Ukraine effects.
Archer Daniels Midland also invested better to end 2021. Its return on invested capital reached 10% in Q4 ‘21, up from 7.7% in Q4 ‘20. ADM touches much of the consumer staples value chain and that is going to keep it strong moving forward.
Wheat Stocks to Buy: Farmland Partners (FPI)
Farmland Partners is a real estate investment trust (REIT) that focuses on cropland real estate. It manages and acquires farmland and agricultural property that covers basic crops including corn, soybeans, wheat, rice, and cotton.
And the Ukraine invasion has sent its share prices moving upward. To be fair, FPI stock had already reached new highs throughout 2021. Its prices essentially doubled as investors became more interested due to the narrative about farmland real estate future value appreciation. I’m not implying that isn’t the case, only providing background.
And FPI could certainly rise higher on renewed narratives about domestic cropland in the wake of the invasion. Farmland Partners had a strong 2021 in which net income increased 36% to $10.2 million.
If the company can control expenses during this period, those net income figures should rise again as its top line is likely to increase. The only word of caution here is that FPI stock is already fully priced at $12.92. That said, it could easily rise and the high analyst price does reach $16.
CME Group (CME)
CME Group is a leading derivatives marketplace. The exchanges it operates exist to help manage risk. That’s certainly true of commodities markets including wheat.
So technically CME Group isn’t a ‘wheat stock’ per se. But given its role in the wheat market, it makes sense to at least consider it.
Moreover, in a world where inflation rates have reached 7.9%, CME becomes doubly attractive. Its stock will rise if the company can effectively navigate these tumultuous times.
Black Sea Wheat and Australian Wheat are becoming much more influential market movers than in the past. CME stock could move as those particular markets swing into prominence.
Wheat Stocks to Buy: Seaboard Corp. (SEB)
Seaboard Corp. is primarily an agribusiness firm that operates in pork and turkey. That makes it a seemingly odd choice in this discussion about wheat. However, Seaboard Corp. also operates an Overseas & Trading Group.
That group operates vertically integrated milling assets in South America, the Caribbean, and Africa. Those assets market approximately 13 million metric tons of commodities annually. If the company can leverage that arm of the business to get more wheat stateside then it stands to reason that SEB stock will rise in price.
It also operates seven dry bulk vessels which certainly matter in this environment. Dry bulk prices should rise in response to the market dynamics. This again gives Seaboard Corp. a revenue opportunity that should lead to increased share prices. The company saw increased revenues throughout 2021 which should continue throughout 2022.
On the date of publication, Alex Sirois 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.