Today, Zacks Investment Ideas feature highlights Features: Agrium, Inc. (NYSE: AGU), Bunge LimitedBG), Corn Products International, Inc. (NYSE: CPO) and Deere & Co. (NYSE: DE). (NYSE:
Are Ag Stocks the Next Gold?
There is a very hot story developing in agriculture right now that every well-informed investor needs to know about.
On the back of surging demand and erratic global weather patterns, multiple key agricultural commodities like wheat, sugar, cotton and coffee are trading at or near historical highs, creating some very compelling investment opportunities for those following the story.
Let's go ahead and take a closer look.
Russian Drought Lifts Wheat
This spring and summer, a devastating heat wave and drought swept through Russia, putting a serious dent in one of the world's largest wheat producers annual production. The event led the country to ban wheat exports until next year, which sent wheat prices soaring to a multi-year high.
Brazil's Trimmed Production Boosts Sugar
Sugar has also seen big gains in the last few months, recently hitting a new 29-year high after analysts cut their projections for Brazil's output, the world's largest producer and exporter. That development comes on the heels of a 2009 that saw sugar prices more than double.
Floods in Pakistan Drives Cotton
If you notice higher prices for clothes this winter, here is why. Cotton recently traded to a 44-year high on surging demand from China after Pakistan, the world's fourth largest producer of Cotton, suffered from massive floods that are expected to cut into their usual production capacities. Rumors of weak production out of China, the world's largest producer, also helped to drive prices higher.
Coffee Hits 12-Year High
Just in case there is anyone left out there who isn't convinced of the secular growth trend occurring in agricultural on growing demand and erratic weather, let's go ahead and take a quick look at coffee, recently hitting a 12-year high after supplies of Arabic beans from Columbia fell to a 33-year low.
So as you can see, the agriculture sector is booming right now. And although there is bound to be plenty of volatility in the short run as the relationship between supply and demand fluctuates, the long-term trend of surging demand from emerging markets and erratic global weather patterns clipping production should provide plenty of support for long-term gains.
Here is a list of four awesome agriculture stocks to take advantage of the trend.
4 Awesome Agriculture Stocks
Agrium, Inc. (NYSE: AGU) is a Zacks #1 rank stock with a market cap of $12 billion. This is a diversified play on agriculture because as a fertilizer producer, the company sells its products to a wide range of farmers and producers. With a bullish next-year estimate of 23% and a discounted P/E relative to its peers, AGU looks like a solid long-term player. Take a look at the chart below.
Bunge Limited (NYSE: BG) is a Zacks #2 rank stock with a market cap of $8 billion. Bunge is also a diversified play on agriculture, where the company operates in 5 different segments ranging from fertilizers to its agribusiness. The current-year estimate is projecting 138% earnings growth, while the next-year estimate is projecting 76% growth. Although the company's recent earnings history has been spotty, the bullish growth projection should help buoy shares moving forward.
Corn Products International, Inc. (NYSE: CPO) is a Zacks # 2 rank stock with a market cap of $2.9 billion. Shares of CPO have been surging for the past few months on the sugar story, where many companies that rely on sugar have turned to CPO's corn syrup as a replacement. The company has an average earnings surprise of 19% over the last four quarters and a solid next-year estimate calling for 9% growth. Take a look below.
Deere & Co. (NYSE: DE) is a Zacks # 1 rank stock with a market cap of $30 billion. DE has also been hot for the last few months, recently hitting a new multi-year high as farmers snap up new tractors on strong prices. The company has an average earnings surprise of 155% over the last four quarters and a bullish next-year estimate of 15%.
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