As the world’s largest exporter of potash (38% of the global supply in 2022), Canada is a major player in the global agriculture industry, with a decent mix of agricultural stocks you can invest in
But now that we are expected to reach 10 billion sometime by 2050, the agricultural output has to increase to meet the needs of the population.
You can invest in this evergreen sector needed to sustain the human population by adding some of the best Canadian agriculture stocks to your portfolio.
Pros and Cons of Agriculture Stocks
- An ever-growing demand for food.
- Investing in potential agricultural technology breakthroughs.
- Agricultural products are resilient against financial crises.
- Adequate diversification within the sector.
- Few dividend stocks.
- Only two large-cap/blue-chip stocks in Canada.
The Best Canadian Agriculture Stocks
The best Canadian agriculture stocks include a wide range of companies associated with agricultural products and practices. This includes fertilizer companies, manufacturers catering specifically to the farming sector, and companies offering innovative food production solutions.
- Ticker: NTR.TO
- Size: Large Cap
- Forward Dividend Yield: 2.70%
- Dividend Payout Ratio: 13.54%
- Dividend Yield (12-Month Trailing): 2.72%
- Upcoming Dividend Date: Jan 12, 2024
- Market Cap: $37.72 Billion
- Forward P/E Ratio: 11.12
Nutrien is a giant in the global agricultural industry. The company claims to be the largest provider of crop inputs in the world and is responsible for the bulk of Canada’s potash exports.
Considering potash is one of the three core ingredients of what’s classified as a “complete fertilizer,” and Nutrien alone is responsible for a significant portion of global potash supply, it’s a rock-solid agricultural investment.
The company, while not completely infallible, is incredibly resilient and might only face significant challenges in the market if a revolutionary new fertilizer enters the market that doesn’t rely on potash.
Different potash alternatives are being researched, but factors like costs, yields, global distribution, etc., are a significant barrier which is beneficial for Nutrien.
Another strength Nutrien possesses is its powerful presence in the Nitrogen fertilizer segment of the market, where China, the US, and Russia currently dominate. It’s the third-largest Nitrogen producer in the world.
The company has a massive presence – 2,000 locations across the world, 9 Nitrogen production facilities, 13 ammonia plants, 6 potash mine networks, and 300 distribution points.
The stock rose over 80% in the three years between Feb 2020 and Feb 2023 and offers highly sustainable dividends at a decent yield.
- Ticker: SAP.TO
- Size: Large Cap
- Forward Dividend Yield: 1.95%
- Dividend Payout Ratio: 60.00%
- Dividend Yield (12-Month Trailing): 2.74%
- Upcoming Dividend Date: Dec 15, 2023
- Market Cap: $11.29 Billion
- Forward P/E Ratio: 12.76
Saputo is the milk giant of Canada and the tenth-largest company in the world in this domain. Milk is one of the most crucial and actively consumed agricultural commodities directly connected to farming (farmland and feed).
The company has a decent local and powerful international presence, and it’s the largest dairy processor in Australia and Argentina, and the largest manufacturer of branded cheese and dairy spreads in the UK.
A powerful presence in three different global regions makes its portfolio well diversified.
It has 67 production facilities, with the largest share in the US, and sells products in 60 different countries. It has a portfolio of 22 brands in the US, 27 in Canada, and 10 in Europe.
It’s a financially solid company that has experienced powerful growth over the years, but it’s not reflected as neatly in the stock’s performance. It experienced powerful growth (380%) in the eight years between Jan 2009 and Jan 2017, but it has fluctuated up and down since.
However, it is a dividends aristocrat with a steady dividend payout history. In the long term, your chances of growing your capital in Saputo are higher than losing money with this stock.
SunOpta operates in a specific niche of the food/agriculture industry – organic foods and beverages. The company operates in three countries (Canada, US, and Mexico) and has 14 locations in its portfolio.
It’s committed to offering organic, non-GMO plant-based food products to the market. It has completed at least 37 acquisitions to date and has a comprehensive portfolio of products, including frozen fruits, snacks, beverages, and plant-based ingredients.
Despite being part of an evergreen sector, the stock is cyclical in nature. If you buy it discounted or moved in that direction, you may have a good chance of enjoying decent returns in a few years.
It’s also a great investment if you aim to raise the ESG profile of your portfolio since it’s an environmentally and socially conscious company (by virtue of its products).
4. Ag Growth International
- Ticker: AFN.TO
- Size: Small-Cap
- Forward Dividend Yield: 1.13%
- Dividend Payout Ratio: N/A
- Dividend Yield (12-Month Trailing): 1.2%
- Upcoming Dividend Date: Oct 16, 2023
- Market Cap: $955.52 Million
- Forward P/E Ratio: 8.71
AG Growth International is a manufacturer focused on agricultural infrastructure. The company has divided its products and services into five platforms: seed, fertilizer, feed, food, and grain, and has 30 brands under its banner.
It has developed an impressive portfolio of products and services around each of these agricultural segments. The product portfolio contains structures, storage solutions, portable/permanent handling, and tech products specific to the agricultural sector.
From a business model and financial perspective, AG Growth is a remarkable investment. Not only is it at the back end of agriculture, the sector that’s feeding the world, but it has also covered almost all the steps associated with a crop’s lifecycle. It has a presence on six continents, i.e., a massive global footprint.
The stock has been relatively cyclical, at least in the 13 years between Feb 2019 and Feb 2023. It has seen four growth cycles in that period.
Since it’s also a dividend payer, buying it when it has fallen (hard) may give you the best return potential. You will be able to lock in a more compelling yield and benefit from the growth in the next bullish cycle.
Multiple entries and exits may be challenging to handle for inexperienced investors, but it may be the best approach to maximizing your profits from this stock.
Verde Agritech has roots in the UK, where it was first incorporated as an agricultural technology company. Now, it’s headquartered and operates in Brazil, but it’s listed on the TSX.
It owns the first potash mine in Brazil and has two major fertilizer brands in its portfolio. The company is rapidly growing its output and, consequently, the revenues from sales.
It’s not a Brazilian version of Nutrien, but the company does have the advantage of Geography, mainly low-cost production. It’s also working on fertilizers with microorganisms, which can push the yield higher.
Verde can be a powerful investment if bought at the right time and under the right market conditions, but it may not be a good long-term investment due to its inconsistent growth history and no dividends.
Itafos is a phosphate fertilizer producer with two production plants – one in the US and another in Brazil (which has yet to come online). The company is headquartered in the US but listed in Canada.
At its current price, the company is a mere shadow of its former self, as it used to be at least 260 times larger up until 2012. The company, in its current size, seems financially healthy and caters to a small segment of the market.
Its strength comes from integrating mining operations with refining/processing, massive mineral reserves, and geographically diversified assets.
The stock’s performance (in the last few years) has been a series of slumps and spikes. If you buy low and manage to ride a decent-sized spike all the way to the top, you may easily double your capital with this stock.
MustGrow Biologics stands out from other agricultural stocks on this list thanks to its business orientation.
It’s an agricultural biotech company that has developed plant-based, organic solutions for certain farming problems – Pests and invasive plants. The company has developed biopesticides, biofumigant to fight off pests that destroy crops, and bioherbicides using mustard seeds.
It’s benign, organic, and, thanks to a decent shelf-life, a viable alternative to synthetic pesticides and herbicides.
MustGrow allows you to invest in an idea that has already proved viable and can be ground-breaking with the right marketing and penetration.
The stock is too young to deduce patterns from its performance data, but the technology is promising and may take the stock to substantial heights.
Gensource Potash is a Saskatoon-based company that aims to leverage the region’s natural Potash resources and emerge as one of the lowest-cost producers.
It has three projects planned, and its flagship project has received a promise of funding to develop the necessary infrastructure. Even though the numbers seem promising now, Gensource Potash has yet to deliver on its promise.
So far, this small penny stock has shown no signs of stable long-term growth. Its small spikes seem quite powerful, assuming you can buy and sell at the same time.
But it’s important to realize that it’s still just a promising prospect. If things go well with its flagship project. The company can go up significantly. If not, it may remain stagnant or go down.
Clean Seed Capital claims to be a pioneer in seeding and planting technologies. Its SMART Seeder Max does seem to be on the cutting edge and offers some of the best features in Variable Seeding technology.
But the company is not just dependent on one machine. It’s in the process of patenting its planting ideas, which promise a planting approach that offers a high yield while requiring less water and fertilizer.
The idea is promising, but the stock seems to follow the pattern of many other small-cap and nano-cap Canadian agricultural stocks – cyclical growth.
You can buy low and either wait for the next spike to cash out or wait for the company’s technology to become worldwide and pay off on its full potential.
CO2 GRO offers a unique way to increase plant yield. The company offers carbon dioxide-based solutions for greenhouses, hoop-houses, and tunnel farming.
The premise of the solution is quite simple – covering the leaves of a plant with carbon dioxide solution and creating a film. This facilitates higher yield and acts as additional protection against some pesticides, herbicides, and other plant destroyers.
It has been used to grow kale with 35% more biomass, bell pepper plants with 30% more fruits, and 25% more Cannabis buds.
The stock trades in both Canada and Germany, and a European-market presence (due to their stringent legal system) is an endorsement for the company. The stock has spiked at least five times in the last ten years.
If you buy now and wait for the next spike, you may get comparable or even better returns than steady growth stocks.
The Canadian agricultural sector is quite rich in variety. You have access to giants like Nutrien and Saputo and small-cap companies (AG Growth) with a massive global footprint.
Then you have companies that are working on some ground-breaking technologies that might break big and shoot the stock up at an incredible pace. This allows you to achieve adequate diversification within the sector.
But there are some challenges as well. Due to the lack of uniformity that you see in sectors like energy and financials, which can help you identify patterns that might impact the whole sector (like oil prices rising or gold falling), you may need to keep an eye on each stock to make an investment decision.
This is not ideal for investors with a passive investment style.
Another problem is the lack of dividend stocks, and even the dividend payers that exist don’t offer a very attractive yield. So agriculture stocks may not be good picks for passive income investors.
Despite being tied to the most evergreen commodity – food, many smaller agriculture stocks offer cyclical growth. The upside is that a cyclical spike can help you achieve more gains in a short amount of time, assuming you can buy and sell at the perfect time.
How To Buy The Best Canadian Agriculture Stocks
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Humans developed such complex societies and revolutionary technologies because we “learned to stay put” in one place for a long time, and that’s primarily thanks to agriculture.
It is what allowed our population to explode because, as hunter-gatherers, the human population would have maxed out at about 10 million.
Food and, by extension, agriculture can prove to be incredibly safe investments for the long term, even if the performance of the best Canadian agriculture stocks doesn’t reflect it right now.
Whether you are buying one of the giants in the sector or the nano-cap agriculture stocks, it’s a good idea to wait for the dip.
If you are looking for an alternative way to invest in agriculture stock, these eleven fertilizer stocks may give you some options.