4 Agriculture Stocks to Feed Your Portfolio

By Michael Vodicka
On 1:00 am EDT, Thursday October 22, 2009

Will farmers be driving Ferraris in ten years? That's what Jim Rogers, the legendary, billionaire investor who founded the Quantum fund thinks. Whether or not that turns out to be true remains to be seen, but his sentiment is based upon a few key factors that continue to put upward pressure on the prices of agricultural goods.

3 Factors That Could Effect Prices

1.) Emerging Market Demand

Emerging market economies like China and India are growing by leaps and bounds, enriching the countries citizens and creating more demand for higher-end food products that we have grown accustomed to in the States. But due to a combination of surging demand and massive populations, these countries lack the infrastructure and production capacities to satisfy that 'hunger'. China, for example, is home to 22% of the worlds population but just 7% of its arable land. So in order to fill the gap these countries will need to expand their imports, which stands to be a boon for long-term gains in the agriculture industry.

2.) Inflation Hedge

With the Dollar collapsing at a break-neck pace, investors continue to flock to companies that trade in 'hard assets', and the agricultural complex definitely qualifies. Although corn, beans and wheat are down sharply from last year, prices have recently begun to rebound and move higher. Hard assets are currency neutral and will continue to be a great investment destination for anyone concerned about the debasement of paper currencies.

3.) Global Weather Volatility

Farmers live in a precarious world. One season, they spend months praying for rain to nourish their crop, then the next, the crop gets wiped because of too much rain. Just this summer, sugar prices soared to a new 28-year high after a drought killed production in India. Ag producers need just the right balance of rain, sunshine and nutrients to produce the desired yield, something that consistently effects production and in turn prices.

Now that we have a basic understanding of the underlying fundamentals effecting prices and consumption in agriculture, let's go ahead and take a look at some companies that look well positioned to benefit from the trend.

4 Agriculture Stocks

The Anderson's, Inc. (NasdaqGS: ANDE - News) is an agriculture producer and transporter in the U.S. The company's share price took a hit last year but has since rebounded nicely as estimate and the economy in general have recovered. With the current-year estimate pegged at $2.22, this Zacks #1 rank stock offers some value with a P/E of 15X, The next-year estimate is bullish, projecting 27% earnings growth. Take a look at the recent bounce in the chart below.

China Green Agriculture, Inc. (AMEX: CGA - News) operates as a fertilizer producer out of China. Shares posted big gains this year as China's economy has remained hot, recently reporting this-quarter GDP growth of 8.9%. The company's next-year growth projection is a bullish 57%.

Zhongpin Inc. (NasdaqGS: HOGS - News) has posted huge gains in 2009, with its share price more than doubling after bottoming out in early March just above $7. The Chinese based agriculture producer and Zacks #1 rank stock offers big value in a very bullish environment, trading at just 10X projected current-year earnings, with a solid 18% next-year growth projection to boot. Take a look at the chart below.

Deere Co. (NYSE: DE - News) develops and manufactures farming machines and equipment. If farmer's are raking in big bucks, they will in turn be looking to upgrade their equipment, something that will provide shares of DE with a very nice boost. As it stands, the company's share price is down from its peak in early 2008, but begun to rebound on a nice earnings beat last quarter and rising estimates. Take a look at the formation below.

Conclusion

When you take a composite view of the agricultural landscape its easy to see that there are a number of macro-level trends that could produce long-term growth prospects. It's a great way to round out your portfolio and give you a chance to out-perform the averages over the long haul.

ANDERSONS INC (ANDE): Free Stock Analysis Report

CHINA GREEN AGR (CGA): Free Stock Analysis Report

ZHONGPIN INC (HOGS): Free Stock Analysis Report

DEERE & CO (DE): Free Stock Analysis Report

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