So basically the agriculture industry in North America is SO big that I literally have to break it up into two different blog posts. This first one is going to be on the smaller side talking about chemical companies and the growing side of agriculture. The second part is going to be about the equipment side of agriculture. One of the more difficult parts of doing this though is that most of the chemical/growing parts of agriculture is finding a public company to invest in that is based in North America. But since agriculture is a $3 trillion a year industry, there are some big players. The biggest company in the industry(Cargill) is a privately owned company and the biggest family owned Agriculture company in the US.
Here in Canada we basically have a monopoly in the chemical side of agriculture and that happened when the 2 biggest separate companies merged. What used to be Agrium in. and Potashcorp turned into the gigantic Nutrien(NTR). The 2 companies merged in 2018 to create the largest producer of potash and second largest producer of nitrogen fertilizer in the world. In the US, Corteva Agriscience(CTVA) who is owned by Dupont(DD) is the biggest chemical producer due to its merger back in 2017. The 2 companies of Dow Chemical and Dupont merged and created a Corteva Agriscience that brings in $14 billion in revenue a year. As for the manufacturing side of it all I want to talk about Ag Growth International inc.(AFN) who is massively global. They are across 5 agribusiness platforms and on 6 continents. As you can tell all of these companies deserve to be at the top of anyone’s agriculture list.
All 3 of these companies are a great way to diversify your portfolio. I mean really, why wouldn’t you want any one of the 3 biggest agricultural chemical companies in North America as a part of your investments? You take full advantage of the industry from this and support our farmers at the same time. Agriculture is a major industry in Canada, its probably the biggest industry when it comes to land occupation really. In saying that, there is A LOT of farm land in Canada. And in Canada, if you don’t live in the city you are probably a farmer haha.
Firstly I want to talk to Nutrien because I feel that they are the safer investment in North America. They are listed on both the TSX and the NYSE. One of the main reasons that I say that its the safer investment is because European companies keep buying up US agribusinesses, look at Bayer(German agribusiness) buying out Monsanto. I’m not saying that a Canadian company WON’T be bought and headquartered in Europe, but its hopefully not likely from an investment point of view. Anyways, they are a pretty safe investment but also one that I feel will be growing quickly in the future. Last year they paid out $3.3 billion to shareholders through dividends and share buy backs. They also had $2.2 billion in free cash flow. Nutrien is a global company, they are in North America, South America, Australia, Africa and Asia. They did $20 billion in sales last year up from $19.6 billion in 2018, that’s a pretty big jump. They are definitely on my watch list because they have really strong numbers but have been hit pretty hard from Covid-19 and are still trying to recover, but when they do watch out.
Nutrien(NTR)- $45.51/Share, $25.9 Billion Market Cap, 2.23 EPS, 19.7 P/E(forward), 5.40% Dividend Yield and 77% Dividend Payout Ratio(based on last years est).
Next I would like to talk about Corteva Agriscience. They are also a fairly global company with operations in North America, parts of Europe, parts of the middle East, Africa, Asia and South America. It is a little tough to track Corteva because it is still a pretty new company since the merger. They recorded sales of $13.8 billion in 2019 down from $14.3 billion in 2018. I do not think that is much of an issue though given the fact that the population is growing(even with Covid-19). Corteva also stated that part of the decrease in sales was due to tougher growing conditions caused by bad weather. This year so far has been pretty good and growing conditions have been a little more ideal than last years. On a positive note they have increased sales in South America while keeping sales in the rest of the world pretty much the same but had a slight decrease in North America. There are a few pros and cons to this company but with having the Dupont backing and support how can you really go wrong?
Corteva Agriscience(CTVA)-$27.94/Share, $20.86 Billion(USD) Market Cap, 0.24 EPS, 19.8 P/E(forward), Dividend Yield 1.87% and Dividend Payout Ratio 39%(based on last years numbers).
Lastly I would like to talk about Ag Growth International inc. They manufacture grain, blending, seed, fertilizer, feed/food handling, Conditioning and storage equipment. Last year they had $999 million in sales(almost $1 billion) up from $934 million the year before. Do you think that this year they will break the $1 billion mark? Its tough to say given the economy right now but their trend and track record could show their biggest year of growth yet. Their first quarter this year they beat their estimates so lets just hope they can keep that up. Though opposite of Corteva their sales in North America were up 5% from 2018 to 2019. But poor growing conditions decreased their sales Internationally by 14%. That isn’t such a bad thing since their international footprint is no where near as big as it is in North America. They are continuing to expand globally regardless and although they will face adversity in 2020 with Covid-19 I think that they will not be held back for very long. I am keeping my eye on Ag Growth International for now.
Ag Growth Internation in.(AFN)-$28.52/Share, $523.8 million Market Cap, -2.5 EPS, 16.8 P/E(forward), Dividend Yield 2.14% and Dividend Payout Ratio 87%(based on this years est)
I feel that these are your best bets to get into this side of agriculture investing. Although they are not my typical style of investments because they all have fairly small dividends that still shouldn’t hold you back. They are all growing their sales and revenue and their dividends will probably follow. These are all pretty safe investments and not to mention will provide great returns for a long term investor. I feel though that Nutrien is the best bet of these 3 which is why it is on my watch list and is one of my next potential buys. I just hope that this industry is not hit very hard by Covid-19 and they can recover nicely, especially with growing population and the agriculture demand that is growing. Make sure the check out Part 2 of this post coming out next week.
That is all for today and remember everyone, invest in yourself first.
Disclaimer* All share prices are after market close today July 15, 2020.