AgriFocus African Markets

Top Menu

  • Advertise
  • Horticulture
  • Aquaculture
  • Crops
  • Livestock
  • Machinery
  • Technology
  • Directory
  • subscribe

Main Menu

  • Home
  • International News
  • Local News
  • Agribusiness
  • Events
  • Magazine
  • Advertise
  • Contact Us
Sign in / Join

Login

Welcome! Login in to your account
Lost your password?
Register

Lost Password

Back to login

Register

Back to login
  • Advertise
  • Horticulture
  • Aquaculture
  • Crops
  • Livestock
  • Machinery
  • Technology
  • Directory
  • subscribe

logo

Header Banner

AgriFocus African Markets

  • Home
  • International News
  • Local News
  • Agribusiness
  • Events
  • Magazine
  • Advertise
  • Contact Us
  • Agribusiness Confidence Index declines in Q4 of 2019

  • South Africa is missing out on fresh fruit export growth. What it needs to do

  • TOMRA Sorting Food: MAKING THE FUTURE OF FOOD SUSTAINABLE

  • Two chutney recipes as festive stocking fillers.

  • South African Police Service to reclassify abalone poaching as serious priority crime

  • BMG’s Ammeraal Beltech Rapplon folder gluer belts meet FDA and EC standards for contact with foodstuffs

  • Ceremony in Addis Ababa celebrates the appointment of Wereta International Business PLC as Case IH distributor for Ethiopia

  • Vegetable Gardening: 25 Tips & Tricks

  • WATCH: Agritech Africa 2020

  • Technology and Innovation Will Help Speed Up Removal of Land Sector Corruption in Africa

Horticulture
Home›Horticulture›Farm on the stock market, and increase your profits

Farm on the stock market, and increase your profits

By Brandon Moss
June 10, 2019
646
0
Share:

Traditionally, agricultural and food companies have been treated as the stepchildren of the stock market.

Today, however, global supply constraints, combined with rising demand for food and technological developments, have turned many of these companies into attractive components of a well-diversified investment portfolio.

According to Andrew Dittberner, chief investment officer at Old Mutual Private Client Securities, annual shareholder returns for listed energy companies and information technology companies since 2004 have averaged 13% and 10% respectively, whereas returns of more than 100 global listed food and agri companies have averaged about 17% a year.

The outlook for the sector is also bullish, as its long-term dynamics are supported from both the demand and supply sides.

“Agricultural commodities are essentials used as food, feed and fuel, and the demand for each of these is bound to increase. On the supply side, both arable land and water are becoming scarcer, which in turn will result in an increased demand for livestock feed,” he says.

Top agri stock picks
Dittberner differentiates between the commodity derivatives market and the equity market. Agricultural producers, users and investors use the commodity derivatives market, such as Safex, to manage their exposure to prices they may receive or pay for commodities.

Investing in agriculture through the equity market, however, gives an investor exposure to the end-business, the value of which is related to the future profitability of the venture.

He identified Atlas Copco, BASF SE, Deere & Co, Ecolab, Mondi, Unilever, Archer Daniels, Tyson Foods, Zoetis and Agco Corp as some of the companies that have performed well in recent times, and singled out Nestlé and AB Inbev as his top picks.

“Nestlé is the largest food and beverage manufacturer in the world and boasts a broad portfolio of products,” he says.

AB Inbev, the world’s largest beer company, has a leading market position in the most important beer regions of the world and earns nearly 50% of its profits in the global beer market.

“The nice thing about the beer market is that people drink beer when times are good, and when times are tough, they drink more beer,” he says.

David Lerche, senior investment analyst at Sanlam Private Wealth, agrees that food and agri companies represent good investment opportunities.

“Many food and agri companies have been traditionally undervalued, especially in the South African market, due to various factors, including poor soft and hard commodity prices.”

Drought conditions in various parts of the country over the past few years have also undermined financial performance in the sector, according to Lerche.

However, prospects are looking brighter now with the return of rain in many parts. Lerche identifies Omnia as his top listed pick and Acorn Agri & Food as his top unlisted pick.

“Omnia is recovering well from the drought, poor grain prices and a poor demand for explosives in the mining sector,” says Lerche.

“Its latest acquisition of fertiliser company Oro Agri will also help the company to significantly expand its global footprint.”

He chooses Acorn Agri & Food, which developed out of a merger between Overberg Agri and Acorn Agri at the start of the year, because Overberg Agri has years of expertise in agricultural production, whereas the strength of Acorn Agri & Food lies in its business strategies and corporate finance.

“The company will most probably list on the JSE within the next four years. For now, though, Acorn Agri & Food shares can be bought over the counter,” he says.

Anthony Clark of Vunani Securities identifies Kaap Agri as his main selection, with Zeder Investments being a more liquid entry point.

According to him, Zeder’s earnings came under pressure during the 2017/2018 financial year due to the drought, political uncertainty and constrained economic growth, but it is a sound choice due to its stake in Pioneer Foods, Capespan, Zaad, Kaap Agri, Agrivision and Quantum Foods.

“Despite the inevitable cyclical nature of agribusiness, the outlook for Zeder is good because of the strength of the underlying companies and management teams, combined with a defensive portfolio mix,” he says.

Hedge your risks
While the agri and food sector offers good investor opportunities, Lerche warns that investments should not be made blindly.

“Farmers should ideally have a well-diversified investment portfolio that allows them to reduce their agricultural production-related risks. For example, if you’re a dryland grain farmer, you should ideally not invest in a company that’s vulnerable to grain price fluctuations and climatic risks. It also makes sense to invest in companies that help reduce the seasonality of farm earnings,” he says.

Nicolaas Hanekom, private client equity manager at Anglo Rand Securities, says agricultural stocks could also be bought to expand a farming business.

“Farmers usually try to increase scale through upward or downward integration into the supply chain, but they don’t have to do this by physically starting a new operation. An alternative would be to buy stocks in companies that specialise in these operations, which carries a much lower risk than having to run one yourself,” he says.

He explains that listed investments are liquid assets that can be sold easily and be offered as security for loans, whereas an on-farm factory does not add value to the farm, cannot be sold separately, and will not be accepted as security by the bank if it falls under the farm’s title deed.

“When comparing investment opportunities with farming, consider the risks as well as the potential for capital appreciation. A local company in the food sector of the JSE is exposed to movements in the currency, as well as movements in the price of agricultural commodities. Farmers are exposed to the same factors, but a listed company such as AVI or Pioneer Foods enjoys the advantage of pricing power. They’re price-makers to a certain extent, whereas farmers are price-takers.”

These companies also generally offer better growth.

“The value of agricultural land in the Western Cape’s wheat-producing areas has increased by 1 700% since 1998, whereas AVI shares have risen by 7 100%, and John Deere shares on the NYSE by 1 840% in rand terms over the same period,” Hanekom says.

He adds that an investment in listed property is psychologically easier for a farmer when he starts a share portfolio.

“With his total investment in agricultural property, the shift to listed property is a relatively easy step to take. From that position, his investment philosophy should evolve to the point where he simply invests in the listed opportunities that offer the most value or the best chance for capital appreciation.”

Use an expert
A farmer should nevertheless use a reputable trader when investing on the stock market.

“Farming has become a highly specialised field. The same applies to the investment market. It takes years of training, skills and knowledge to become a good portfolio manager. You can lose a great deal of money if you make the wrong decisions, so rather pay a professional to do it,” Lerche says.

Hanekom advises farmers to select a portfolio manager in the same way they would select a farm manager.

“When selecting a farm manager, the owner uses criteria such as education, experience, record of accomplishment, communication skills, professionalism, and a proven system and plan to add value to the farm.

“The financial regulations ensure that the portfolio manager cannot ‘walk away’ with the capital, in the same way that the farm manager is not able to steal the farm. There are big differences in investment style and results between portfolio managers, so the choice of fund manager is the most important step.”

Tagshealthsummer
Previous Article

Sophisticated comfort food with Terroir’s new winter ...

Next Article

Agricultural trader records 30% increase in pork ...

0
Shares
  • 0
  • +
  • 0
  • 0
  • 0
  • 0

Brandon Moss

Related articles More from author

  • International News

    Former bank boss Reuel Khoza’s huge avocado investment

    July 16, 2015
    By Brandon Moss
  • Machinery

    John Deere, Corteva sign MoU driving Africa’s agriculture growth

    June 10, 2015
    By Brandon Moss
  • Local News

    ‘Cost of South Africa’s FMD outbreak could reach R10 billion’

    July 16, 2015
    By Brandon Moss
  • International News

    Celebrating Kleine Zalze’s second straight win as best New World Producer

    July 16, 2015
    By Brandon Moss
  • International News

    Vegetable farmer’s strategy for synching production with demand

    July 16, 2015
    By Brandon Moss
  • International News

    €100 million in Brexit compensation for Irish beef farmers

    May 16, 2019
    By Brandon Moss

Leave a reply Cancel reply

You may be interested in

  • Events

    WATCH: Agritech Africa 2020

  • Crops

    World’s food supply ‘under threat’ from increasing loss of biodiversity, warns UN report

  • Livestock

    China’s pig farmers plan to produce mega hog-farms to meet demands of world’s biggest pork market

E-Magazine: October/December 2019

Weekly Newsletter

Sign up for our free weekly newsletter!!

technology

  • Technology

    Technology and Innovation Will Help Speed Up Removal of Land Sector Corruption in Africa

    African countries must act faster to purge corruption in the land sector by harnessing technology and innovation, African Development Bank (AfDB.org) Senior Vice President Charles Boamah urged on Monday. Boamah, who ...
  • Technology

    New Holland Agriculture app “FarmMate” arrives in Africa and Middle East

    FarmMate: the first digital app specifically designed for farmers is now available in Africa and the Middle East with updated product information, agronomic advice and New Holland news tailored to ...
  • Technology

    Why online trading is benefitting SA agriculture

    Today, farmers have access to technology such as the electronic sow feeding (ESF) system that incorporates mixed animal weighing technology aimed at precisely feeding each sow or gilt (identified via ...
  • Technology

    The technologies and trends shaping the supermarket of the future

    Food businesses will have to change to stay competitive – online, in-store, and at sorting and processing plants too. Bjorn Thumas, TOMRA Food´s VP Business Development, Product Management Food Sorting ...
  • Technology

    Load shedding: SA needs urgent electricity sector reforms

    Agri SA is deeply concerned by the negative impact that load shedding can have on the primary agricultural sector, the food value chain and the South African economy. “Eskom implemented ...
  • Technology

    Nokia launches smart agriculture-as-a-service in Algeria

    In partnership with Algeria’s mobile network operator Djezzy, Nokia has set up a Worldwide IoT Network Grid (WING) to equip farmers with practical data and help them achieve better yields ...
  • Technology

    Agri Technovation steers SA agriculture into the 4IR with new mobile app

    Agri Technovation has launched its MyFarmWeb Mobile app to help navigate South African producers into the Fourth Industrial Revolution. MyFarmWeb, developed in partnership with Laeveld Agrochem, Vodacom and Mezzanine, is ...
  • Technology

    Precision Farming Market- Global Research Analysis, Trends, Competitive Share And Forecasts 2018 – 2026

    The expansion of the worldwide market for precision farming is impacted by various elements. Machine to machine checking in a general sense lets devices to easily connect with each other ...
  • Technology

    Global scientists root for digital tools to transform Africa’s farming

    thula Ginige, professor of information technology at Western Sydney University, said that a digital revolution holds key to enhanced productivity of African agriculture amid rising demand for food. “We need ...
  • Technology

    Precision Farming and Crop Insurance (Sponsored)

    With more and better location-specific data than ever before coming from sensors ranging from satellites to smartphones and drones, big data is changing the way the world does business. Geospatial ...

Galary

    Machinery

    • Machinery

      TOMRA Sorting Food: MAKING THE FUTURE OF FOOD SUSTAINABLE

      Leuven, Belgium, 19 November 2019 – Nicolai Prytz, sustainability and strategy director at TOMRA, has looked at how businesses, consumers and policymakers can help make the future of food sustainable. ...
    • Machinery

      BMG’s Ammeraal Beltech Rapplon folder gluer belts meet FDA and EC standards for contact with ...

      Ammeraal Beltech Rapplon folder gluer belts for contact with foodstuffs  Ammeraal Beltech’s Rapplon folder gluer belts, which meet FDA and EC standards for contact with dry foodstuffs, form part of ...
    • Machinery

      TOMRA FOOD INTRODUCES NEW SORTING MACHINE FOR POTATOES

      Leuven, Belgium,  – TOMRA Food has introduced the TOMRA 3A sensor-based sorting machine for freshly harvested root crops, offering potato growers unrivalled sorting capabilities, dependability, and affordability. Developed in response ...
    • Machinery

      Continental has launched new VF TractorMaster Hybrid with intelligent sensors for digital tyre monitoring at ...

      Continental VF TractorMaster Hybrid. (Image source: Continental) With its vision of intelligent tyres and zero accidents as well as the varied working environment of farmers in mind, Continental continuously develops ...
    • Machinery

      BKT breaks records at Agritechnica 2019

      At Hannover, the Indian multinational group celebrates 500 thousand footballs distributed for free to visitors at the trade shows in which it takes part. Agritechnica is the world’s leading trade ...

    The Agrifocus African Markets Magazine and the www.agrifocusafrica.com Online Portal are registered and published under Lothbrok Media, A devision of The Lothbrok Group. All Rights Reserved. www.lothbrokmedia.com

    • Recent

    • Popular

    • Comments

    • Agribusiness Confidence Index declines in Q4 of 2019

      By Brandon Moss
      December 9, 2019
    • South Africa is missing out on fresh fruit export growth. What it needs to do

      By Brandon Moss
      December 9, 2019
    • TOMRA Sorting Food: MAKING THE FUTURE OF FOOD SUSTAINABLE

      By Brandon Moss
      December 5, 2019
    • Two chutney recipes as festive stocking fillers.

      By Brandon Moss
      December 5, 2019
    • Officials, Plantation Owners, Tech Companies and Funding Agencies to Attend 6th Commercial Farm Africa in ...

      By Brandon Moss
      September 11, 2019
    • EU-African task force proposes new way ahead for African rural development

      By Brandon Moss
      June 10, 2015
    • Kenya moves closer to goal of 100% renewable energy generation by 2030

      By Brandon Moss
      July 29, 2019
    • Oak Valley Farm to equality court

      By Brandon Moss
      July 4, 2019
    • ctshirts offer code
      on
      December 5, 2019

      Officials, Plantation Owners, Tech Companies and Funding Agencies to Attend 6th Commercial Farm Africa in Nairobi

      Thanks to my father ...
    • t shirt 1 terre haute
      on
      December 5, 2019

      Officials, Plantation Owners, Tech Companies and Funding Agencies to Attend 6th Commercial Farm Africa in Nairobi

      Hey there! I could ...
    • ugly christmas sweater on sale
      on
      December 5, 2019

      Officials, Plantation Owners, Tech Companies and Funding Agencies to Attend 6th Commercial Farm Africa in Nairobi

      Hello outstanding website! Does ...
    • ugly christmas sweater hoodie
      on
      December 5, 2019

      Officials, Plantation Owners, Tech Companies and Funding Agencies to Attend 6th Commercial Farm Africa in Nairobi

      Hello there! This is ...

    Contact Us

    Head Office
    5 The Ferns, 364 Pretoria Avenue, Randburg, South Africa, 2194

    Tell : +27 67 212 7565
    Fax: 086 678 6956
    www.lothbrokmedia.com

    Sales and Advertising
    Dowellcs@lothbrokmedia.com
    Brandonm@Agrifocusafrica.com

    Accounts
    Info@lothbrokmedia.com

    Zambia
    33 Malata Road, Madras,Lusaka, Zambia 3928Tell:+ 26 76 136 3654
    Email Info
    Info@agrifocusafrica.com

     

    • Privacy Policy
    © Copyright www.agrifocusafrica.com. All rights reserved.