The Grass is Greener: Best Agriculture Investments in 2023
Humans have been farming for over 10,000 years, but the evolution of agriculture over the past century is a trend investors must capitalize on.
Updated Apr 6, 2022
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Everyone's gotta eat, regardless of economic certainty. Agriculture is vital to our continued burgeoning as a species, and even as the industry became more industrialized, investors continued to seek profit from the production of soft commodities like wheat, cotton, and beef—this is why investments in farmland and agriculture are often seen as a way to create a more recession-resistant portfolio.
Investors who are looking to gain broader exposure to agriculture commodities should consider adding an agriculture exchange-traded fund (ETF) to their portfolio.
Many publicly traded agriculture companies have found success in other ways, such as by manufacturing farming auxiliaries like tractors and fertilizers. Some of the best agricultural stocks are from companies on the cutting edge of agricultural science and technology. Here are some top agricultural companies to invest in that are making moves to stay relevant going into the future.
What is precision agriculture?
What is precision agriculture?
Traditional agricultural investments focused on companies directly involved in farming, processing crops, or selling equipment to farmers, but the impending impacts of climate change, ecological damage, and population growth have made the industry dependent on science to maintain sustainability and the bottom line. Some of the best publicly traded agricultural companies are the ones that leverage advanced technology and valuable data.
Planet Labs is a satellite company that provides earth imagery data for forest management, biodiversity monitoring, drought response, agriculture, and several other applications. The success of Planet Labs is owed to its constellation of over 200 geospatial satellites that monitor crops and ecological trends using information gathered from space. This helps farmers and can address environmental issues.
The price of Planet Labs' stock has nearly halved since going public last year. However, this downward action doesn't reflect their strong balance sheet and the unrealized value of repeat imagery of the Earth's surface. Planet Labs is designated a public benefit corporation because its mission goes beyond just its interests as a for-profit business. The prospects of Planet Labs as an investment only improve as it grows its partnership with Elon Musk's SpaceX and expands to other applications like traffic management.
Founded as Deere & Company in 1837, the company began by manufacturing plows, pitchforks, and other farming equipment. John Deere was made famous in the early 20th century for its state-of-the-art tractors, and it quickly became a global leader in the agriculture industry. John Deere is one of the most innovative agricultural companies because of its responsiveness and adaptability to the needs of farmers.
Despite the age of the company, John Deere was never averse to technological innovations introduced in the era of information. In addition to integrating new tech with its battle-tested tractors, John Deere is also expanding to the field of precision agriculture and had recently unveiled its first autonomous tractor. There's a favorable outlook on the company's stock as they further embrace the internet-of-things and other high-tech enhancements.
Founded as a utility and telecommunications infrastructure manufacturing company in Japan, NEC Corporation has grown since its founding in 1898 to become a global leader in nearly every high-tech industry. The publicly traded multinational company recently invested in CropX, an Israeli company that develops data management tools for farmers.
Investors who buy shares of NEC may like it for being a highly diversified company that has had joint ventures with Samsung and Lenovo in the past. It continues to acquire new companies (like Swiss fintech Avaloq in late 2020) and expand into new business opportunities (such as the development of 5G infrastructure after the US banned Chinese firm Huawei from doing so). In addition to being an all-around safe-bet stock, NEC is likely to continue gaining exposure to agritech businesses through future investments and acquisitions.
Another company focused on manufacturing agricultural auxiliaries is Caterpillar, Inc, an American firm that develops industrial technology and sells farming and earthmoving equipment. There's a high chance you caught a glimpse of the 'CAT' logo if you've ever passed by almost any construction site in the world.
After it was founded as the Holt Manufacturing Company in the 1890s, its tractor and engine business faced fierce competition from John Deere and Ford. The Caterpillar we recognize today formed as a result of the need for road-building equipment after the passage of the American Highways Act of 1921. CAT may be a good investment due to its diversification into several industries, including agriculture and forestry.
Titan International—the parent company of Titan and Goodyear—is one of the largest manufacturers of tractor tires and undercarriages for industrial applications, including construction, forestry, and agriculture. While Titan may be the least techy stock thus far, the company does have a strong horizontal position across all vehicle manufacturing segments.
Titian has manufactured tires and vehicle frames since the 1890s and is among many companies that ascended after the second industrial revolution, but disruptions by labor strikes in the 1980s prompted the company to restructure. After several acquisitions throughout the 1990s and early 2000s, Titian International grew its global presence, and the company's success is reflected by its stock price.
Merck is a global pharmaceutical company with a large focus on veterinary applications conducted by its animal health division. While Merck makes most of its money by owning patents to several drugs like vaccines and antibiotics, MSD Animal Health has acquired over a dozen of veterinary technology and pharmaceutical companies over the past five years.
One example of a major technology developed by MSD Animal Health is a sound collection device that uses artificial intelligence technology to detect Bovine Respiratory Disease in cows called Whisper On Arrival. MSD Animal Health was named best animal health company in North America by market intelligence firm IHS Markit, so gaining exposure to that division through Merck shares could make it a good investment.
Investors who are looking to gain broader exposure to agriculture commodities should consider adding an agricultural exchange-traded fund (ETF) to their portfolio. While agricultural commodities futures contracts are some of the most lucrative investments, they are also some of the riskiest. Investors who want their allocation to reflect the whole agriculture industry should buy shares in an ETF that aims to reflect a diversified agricultural index.
Invesco DB Agriculture Fund is one of the best ways to gain exposure to agricultural futures without taking on all the implied risk. With a relatively low expense ratio and excellent performance over the past two years, DBA seems like a good investment as its upward trend is projected to continue into the future.