A New Era for Agricultural Stocks (AGCO) (SYT) (GPRE) (MOO)

June 22, 2012 12:36 PM EDT Send to a Friend
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Price: $45.29 +1.80%

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    4 Buy, 13 Hold, 4 Sell

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    Up: 14 | Down: 28 | New: 51
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As demand for commodities sinks, the global farm sector stands out as an interesting investment opportunity. According to analysts at Jefferies, the global farm sector is operating near capacity and planted acres and yields are near records.

Despite a painful recession in recent years, crops have remain above historical levels, suggesting that the usually cycle, marketed by huge ups and downs driven by supply interruptions, has changed - and analysts are pointing to higher demand.

"Crop commodity markets have generally been stable at high levels in recent years as the global supply-demand situation remains tight," noted Jefferies analyst Stephen Volkmann. "Recently the markets have begun to price in the impact of good early weather and higher new crop ending stocks –particularly in corn."

Given warmer weather and deteriorating crop conditions, the USDA's initial yield estimates are probably overstated. Crop prices are likely to remain above long term averages and well above cash breakeven, notes Volkman.

From an investment standpoint, Volkman likes farm equipment company AGCO Corporation (NYSE: AGCO). He also likes Syngenta (NYSE: SYT) for seeds/chemicals, and Green Plains (Nasdaq: GPRE) as an ethanol play.

The most popular agricultural ETF is Market Vectors Agribusiness (NYSE: MOO).


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