Eight Farming Investments to Buy as Putin Ruins Ukrainian Exports

Paul Dykewicz

[tractor mowing wheat]

Eight farming investments to buy provide fertile opportunities despite  Russia’s President Vladimir Putin continuing its onslaught against Ukraine and its people.

The eight farming investments to buy feature stocks and broad commodity funds that offer a chance for investors to benefit from multiple catalysts. One of the key reasons to buy agricultural stocks and funds is that grain and oilseed prices are rising.

Global grain and oilseed markets were tight heading into 2022, and the war in Ukraine has only strengthened their fundamentals, according to a recent report from BofA Global Research. Since the start of the year, Chicago Board of Trade (CBOT) wheat prices nearly doubled from $7.80 per bushel to $14.25 before settling back down to $10.9275 per bushel on May 9.

Meanwhile, corn prices have climbed past $8.11 per bushel, an increase of more than 30% so far this year, while soybean prices have rallied more than 30%, reached $17.40 per bushel late last month and closed at $15.8525 per bushel on May 9. The three commodities repriced significantly higher, reflecting the likelihood of prolonged disruptions to Ukraine’s agriculture exports and concerns about rising input costs, as well as fertilizer shortages. While prices look high from a historical perspective, tight fundamentals leave the door open for increased spot prices, according to BofA.

Eight Farming Investments to Buy Amid Fertilizer Shortages

Ukraine grain and oilseed shipments have reportedly fallen more than 80% from approximately 5-6mn mt per month in 2020-21 to roughly 1mn mt per month recently, BofA wrote in a recent research note. These lost exports, if annualized, equate to about 10 days of world food supply, BofA added.

“Fuel, fertilizer and seed shortages, and Russian military presence could disrupt Ukraine’s spring planting and wheat crop harvest this summer, which could lead to sustained shortfalls,” BofA warned. “Drought in U.S., Canada and China has the potential to further add to the tightness, especially for wheat.”

Buyers have leaned on other places to source grain, but ultimately the world has less food than before the war, BofA cautioned. If supply shortfalls outside Ukraine materialize, more food security measures may be needed, push prices even higher and hit emerging market economies the hardest.

Eight Farming Investments to Buy Incur 300% Fertilizer Price Hike 

Global fertilizer prices rose at least 300% since 2020 due to soaring energy costs, sanctions and hoarding, BofA wrote. The fertilizer price spike added about $1 per bushel and $0.60 per bushel to corn and soybean costs, respectively. Many farmers may pay the increase, while others could cut their usage.

“Estimating the impact of lower fertilizer use on crop yields is a challenge due to limited data and other factors affecting yields, but there is a positive relationship between fertilizer use on agricultural lands and cereal crop yields,” BofA wrote.

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Eight Farming Investments to Buy Aided by Sanctions on Russia

The shelling of hospitals, schools, residential areas, churches, nuclear power plants, oil refineries and a theater used as a shelter became a precursor to brutal rapes, torture and outright executions of Ukrainian civilians that caused many countries to put sanctions on Russia. The sanctions include scaling back or severing ties with Russia as a producer of grain, oil and natural gas.

Russia’s loss directly from Putin’s invasion are leading to potential gains for Western oil companies that are trying to fill the void for European and other customers seeking to wean themselves away buying commodities from Russia that are helping to fund the war against Ukraine. As an old adage goes, there always is a bull market somewhere. One of the newest is in agriculture.

Fertilizer Stocks Are Among Eight Farming Investments to Buy

Fertilizer manufacturers appear most likely to profit from Russia’s attack against Ukraine, said Bryan Perry, head of the Cash Machine investment newsletter, as well as the Premium Income, Quick Income Trader, Hi-Tech Trader and Breakout Options Alert advisory services. While there may be “demand destruction” in energy markets, there won’t be in the global food supply and demand curves, he added. 

Bryan Perry heads the Cash Machine newsletter.

Wheat, corn and soybean prices jumped upon the full revelation of the Russian attack of Ukraine, Perry continued. One of the big winners from pure demand and sanctions will be CF Industries Holdings, Inc. (NYSE: CF), a manufacturer and distributor of agricultural fertilizers that include ammonia. The company, based in Deerfield, Illinois, a suburb of Chicago, is facing increased distribution costs, particularly for transportation.

Plus, the cost of producing nitrogen fertilizers is highly dependent on the cost of natural gas, which is the principal raw material and primary fuel source used in ammonia production at the company’s manufacturing facilities. For many producers globally, more than 70% of the total cost to produce ammonia is from the cost of natural gas.

The cost of natural gas varies significantly between geographic locations. For example, European customers may see their burden grow, since natural gas prices have been surging there.

Chart courtesy of www.stockcharts.com

Eight Farming Investments to Buy Include Nutrien

Nutrien Ltd. (NYSE: NTR), a Canadian fertilizer company based in Saskatoon, Saskatchewan, is the largest producer of potash and the third-largest producer of nitrogen fertilizer in the world. The company’s interim chief executive Ken Seitz said Nutrien will boost potash production if supply problems worsen in Russia and Belarus, the world’s second- and third-largest potash-producing countries after Canada.

The economic sanctions imposed by the United States, the European Union and others against Russia may hurt the country’s exports of natural gas, potash and nitrogen. Belarus, a puppet state of Russia, has joined the invasion of Ukraine and must adjust to economic sanctions that have restricted its potash exports.

The decision by Putin to wage war against Ukraine further has raised concerns about wheat, corn and vegetable oil supply problems in the Black Sea region. The result is sharply rising world prices for these agricultural products.

Chart courtesy of www.stockcharts.com

CVR Partners Joins Eight Farming Investments to Buy

CVR Partners LP (NYSE: UAN), of Sugar Land, Texas, makes and provides nitrogen fertilizer products as a subsidiary of Coffeyville Resources, a unit of CVR Energy Inc. UAN is another of Perry’s four farming picks. He told me he likes its 9.2% dividend yield for income seekers.

The company’s nitrogen fertilizer manufacturing facility includes a 1,300-ton-per-day ammonia unit, a 3,000 ton-per-day urea ammonium nitrate (UAN) unit and a dual-train gasifier complex that can produce 89 million standard cubic feet of hydrogen per day. The UAN solution, produced by combining urea, nitric acid and ammonia, is a liquid fertilizer product with a nitrogen content ranging from 28% to 32%.

UAN can be applied more uniformly than non-liquid forms of fertilizer. The solution also can be mixed with herbicides, pesticides and other nutrients to let farmers cut costs by applying several materials simultaneously rather than making separate applications.

Chart courtesy of www.stockcharts.com

Mosaic Ranks Among Eight Farming Investments to Buy

The fourth farming investment favored by Perry is Mosaic Company (NYSE: MOS), a Fortune 500 company headquartered in Tampa, Florida, mines phosphate and potash and urea. The largest U.S. producer of potash and phosphate fertilizer, Mosaic operates through segments such as international distribution and Mosaic Fertilizantes. 

Russia is a major producer of potash, a key crop nutrient used in farming production. Mosaic reported solid earnings on Feb. 22 that were in line with expectations. 

Mosaic’s year-over-year earnings per share (EPS) growth rose about 242%. In addition, pricing pressure in the industry caused by less supply out of Russia has lifted the share price of MOS.

Chart courtesy of www.stockcharts.com

Pension Head Picks MOO as One of the Eight Farming Investments to Buy

Investors should weight the purchase of the ETF VanEck Agribusiness (MOO), said Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter. The fund, which I personally have owned for years, seeks to track the MVIS Global Agribusiness Index. The index is composed of companies that generate at least 50% of their revenues from agrichemicals, animal health and fertilizers, seeds and traits, farm/irrigation equipment, farm machinery, aquaculture, fishing, livestock and more.

Bob Carlson, who leads Retirement Watch, meets with Paul Dykewicz.

MOO’s largest holdings recently included Deere & Co. (NYSE: DE), Nutrien (NYSE: NTR), Bayer (OTCMKTS: BAYRY), Zoetis (NYSE: ZTS) and Archer-Daniels Midland (NYSE: ADM). The ETF owns more than 50 stocks and has nearly 60% of its holdings in the 10 largest positions.

Chart courtesy of www.stockcharts.com

Carlson Chooses DBA to Join the Eight Farming Investments to Buy

Despite the evils of war, investors have a chance to profit from the rise in agriculture prices and other commodities through the futures markets, even as many other equities pullback. Instead of buying futures directly, investors can buy diversified agriculture commodities through Invesco DB Agriculture (DBA), another ETF, Carlson said.

The fund seeks to track changes in the DBIQ Diversified Agriculture Index Excess Return. The ETF also earns interest income from cash it invests primarily in Treasury securities, while holding them as collateral for the futures contracts.

The major holdings in the index are soybeans, wheat, corn, coffee and live cattle. The index is reconstituted each November.

Chart courtesy of www.stockcharts.com

Money Manager Picks One of Eight Farming Investments to Buy

A seasoned investment professional who likes farming machinery company Deere (NYSE: DE) is Michelle Connell, a former portfolio manager who now serves as president of Dallas-based Portia Capital Management

Michelle Connell, CEO, Portia Capital Management

The rationale for recommending DE, Connell said, includes:

-More than half its revenues come from large agriculture.

-If the War in Ukraine continues, U.S. farmers will benefit from higher prices for their crops.

-Higher farm profits mean that that farmers and farming corporations will be more likely to buy large expensive farm equipment.  

Deere has fallen back more than 15% from its recent high on April 20, so investors might find now to be a good entry point, Connell continued.

Chart courtesy of www.stockcharts.com

KROP Becomes the Final of Eight Farming Investments to Buy

Global X AgTech & Food Innovation ETF (NASDAQ: KROP) looks interesting as a possible buy, Connell continued. KROP is an agricultural technology ETF.

KROP holds companies that are focused on more ecological means of feeding the world, Connell commented. The fund has done well this year, but several of its individual holdings have retreated with the market sell-off, she added.

However, it might be a less risky way to invest in these innovative companies, Connell mentioned.`

A few key holdings of KROP include:

  • Nutrien, the world’s largest fertilizer producer; and
  • Corteva, a spin-off from Dupont that focuses on the development of seeds that are more pest and weather-resistant, as well as uses more environmentally friendly crop chemicals.

Chart courtesy of www.stockcharts.com

Supply Chains at Risk as China Tightens COVID Restrictions Further

Shanghai is tightening its COVID-19 restrictions again after fleetingly starting to relax them, frustrating residents who had hoped more than a month-long lockdown was easing along with new cases in the city’s financial center. However, Tuesday, May 10, marked the suspension of service on the last two subway lines in the city that had been operating. The shutdown idled the city’s entire subway system.

The lockdowns in China have affected at least 373 million people, including roughly 40% of the country’s gross domestic product (GDP). A key effect is continued disruption of the world’s supply chain for products, such as rice and oil.

Most of Shanghai’s 25 million residents remain in lockdown, with Chinese military and additional health workers assisting in the response. Shanghai, home to the world’s largest port, has strained to unload cargo due to strict regulations that have caused shipping containers to stack up

Some frustrated Shanghai residents have taken videos that went viral to show residents complaining from high-rise buildings about needing food. But government officials are trying to crack down on the posting of such expressions of frustration.

Also in China, young children with COVID-19 have been separated forcibly from their parents, sparking public discord, as Chinese leaders seek to stop the spread of a new, contagious subvariant of Omicron, BA.2. The variant also is causing new infections in European nations such as Germany, the Netherlands and Switzerland.

U.S. COVID Deaths Near 1 Million Milestone

U.S. COVID-19 cases, as of May 11, hit 82,059,839, with deaths rising to 998,048. America still has the dubious distinction as the nation with the most COVID-19 cases and deaths.

COVID-19 deaths worldwide exceeded 6.25 million to total 6,255,457 on May 11, according to Johns Hopkins University. Cases across the globe have jumped to 518,736,189.

As of May 10, 258,229,583 people, or 77.8% of the U.S. population, have obtained at least one dose of a COVID-19 vaccine, the CDC reported. Fully vaccinated people total 220,223,617 or 66.3% of the U.S. population, according to the CDC. America also has topped a key milestone by giving a COVID-19 booster vaccine to 101.4 million people.

The eight farming investments to buy give investors a chance to profit from rising food prices. Investors may find some recent price drops in farming stocks and funds offer a reduced buy price that may not last long if Consumer Price Index and Producer Price Index inflation numbers scheduled for release this week show signs of easing.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for multiple-book pricing.

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