5 Top Winners From Trump's $6 Billion Trade Relief Program
The Federal government has pledged to pay U.S. farmers $4.7 billion to counteract the tariff related losses. Additionally, the administration will make direct purchases of nearly $1.2 billion and deploy around $200 million for developing new export markets for American cultivators.
The U.S. agricultural industry stands to suffer the most from the ongoing trade war between Trump and other overseas economies. The $6 billion bailout program has offered some respite across the country’s farm belt. Also, materialization of a revised trade pact with Mexico and Canada is expected to ease tariff tolls on agricultural products.
The latest relief scheme might have been rolled out by Trump to gain support from heartland states prior to the mid-term elections in November but will definitely benefit tariff-stricken farmers as well.
Against this backdrop, it makes good sense to invest in stocks from the U.S. agricultural, dairy and poultry industries.
What’s in the Offing?
United States Department of Agriculture’s (USDA) Farm Service Agency will administer the support payments of Trump’s Market Facilitation Program. These aids will be restricted to farmers having average gross income of less than $900,000 from 2014 through 2016. Notably, the payment rate will be determined by “the severity of the trade disruption and the period of adjustment to new trade patterns, based on each producer's actual production” – per the USDA.
Out of the $4.7 billion sanctioned amount, the soybean farmers will likely secure the bulk of the bailout offer at about $3.6 billion. The pork, cotton, grain sorghum, wheat and corn growers will be offered a grant of $290 million, $277 million, $156 million, $119 million and $96 million, respectively. Around $127 million will be offered to the dairy producers.
Per the mitigation scheme, the government will also buy certain farming commodities valuing nearly $1.2 billion. These purchasing initiatives will be managed by USDA’s Agricultural Marketing Service division and include products that are mostly impacted by trade retaliation. Notably, the program will offer roughly $85 million for dairy products, around $560 million for pork products, $93 million for apples, $55.6 million for oranges and over $100 million for different types of nuts.
Furthermore, around $200 million will be deployed by the administration to develop new export markets for U.S. agricultural products. USDA’s Foreign Agricultural Service's arm will be handling matters relating to these advances. Creation of new international end markets will likely nullify the adverse impact of trade restrictions from traditional overseas markets.
U.S. Farming Business to Shrug-Off Tariff Setbacks
The U.S. farming segment has been in rife with apprehensions when the largest importer, China, imposed hefty tariffs on products like soybeans, corn, pork and poultry. The situation had got worse when other countries including Canada, Mexico and the European Union slapped fresh duties, against the administration’s fresh duties on steel and aluminium imports.
However, Trump’s strategic mitigation plan will largely turn things in favor by boosting up farmers’ income and creating new foreign export markets for American farming products. Additionally, the revised North American Free Trade Agreement inked this Monday, will also likely lower Mexico’s heavy tariffs on U.S. agricultural products like cheese and pork. A fresh trade deal with Canada might further prove advantageous going forward.
Along with these positives, we perceive that benefits of the organic movement, innovations in food processing, improved grain handling techniques and strong emerging market demand will be conducive to the industry. Notably, the USDA projects agricultural exports of $142.5 billion for 2018, up $3 millionfrom the February forecast.
Five Winners
Trump’s impetus to shield the U.S. agricultural and food industry from the ongoing trade tensions appears gainful. In sync with this, picking stocks from the U.S. farming industry will be a smart investment option. Below, we have handpicked five top-ranked stocks that will likely reap rewards for your portfolio.
These companies currently carries a Zacks Rank #1 (Strong Buy) or 2 and flaunts a VGM Scoreof A or B. Also, the stocks have witnessed positive earnings estimate revisions for the past 60 days.
Archer-Daniels-Midland Company ADM procures, stores, transports, processes and markets agricultural products, and ingredients in the global forum. The Zacks Consensus Estimate for earnings has moved up 11.1% to $3.14 per share for 2018. Notably, the projected year-over-year earnings growth rate for the company is currently pegged at 40.3% and 3.2% for 2018 and 2019, respectively. Archer-Daniels-Midland’s shares have gained 14% in the past three months. The company currently sports a Zacks Rank #1 and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Andersons, Inc. ANDE provides products and services across plant nutrient, ethanol, grain, and rail sectors in the United States and other overseas markets. The company carries a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for earnings has moved up 7.4% to $1.88 per share for 2018. Notably, the projected year-over-year earnings growth rate for the company is currently pegged at 63.5% and 20% for 2018 and 2019, respectively. Andersons’ shares have gained 24.6% in the past three months.
The Mosaic Company MOS produces and sells concentrate potash and phosphate crop nutrients across the globe. The company carries a Zacks Rank #2 and has a VGM Score of A. The Zacks Consensus Estimate for earnings has moved up 11.3% to $1.67 per share for 2018. Notably, the projected year-over-year earnings growth rate for the company is currently pegged at 53.2% and 32.8% for 2018 and 2019, respectively. Mosaic’s shares have gained 10% in the past three months.
Natural Grocers by Vitamin Cottage, Inc. NGVC sells organic and natural groceries, as well as dietary products in the United States. The company carries a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for earnings has moved up 32% to 33 cents per share for 2018. Notably, the projected year-over-year earnings growth rate for the company is pegged at 6.5% and 3% for fiscal 2018 and 2019, respectively. The company’s shares have gained 81.8% in the past three months.
The Chefs' Warehouse, Inc. CHEF distributes different types of speciality food products in the United States and Canada. The company carries a Zacks Rank #2 and has a VGM Score of B. The Zacks Consensus Estimate for earnings has moved up 5.5% to 77 cents per share for fiscal 2018 (ended September 2018). Notably, the projected year-over-year earnings growth rate for the company is currently pegged at 75% and 24.7% for 2018 and 2019, respectively. The company’s shares have gained 1.4% in the past three months.
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