Agribusiness isn’t glamorous business. At least, that’s the sentiment held by many market participants, but there’s no denying the farming-related investment thesis is growing increasingly attractive. Add to that, it’s intersecting with “sexier” fare, such as artificial intelligence.
Glamour or lack thereof aside, agriculture investing was the cover story in most recent edition of Barron’s with the headline “The Boom Time for Farmers Can Last. Who Will Reap the Rewards.” That could be a sign opportunity is afoot with exchange traded funds such as the VanEck Agribusiness ETF (MOO), VanEck Future of Food ETF (YUMY) and the VanEck Natural Resources ETF (HAP).
Take the case of the $1.3 billion MOO, which turns 16 years old in August. Over the past three years, the ETF easily outpaced the S&P 500 and the S&P 500 Industrials Index — a relevant point because the fund allocates nearly 21% of its weight to that sector. Of course, past performance isn’t a promise of future returns, but MOO is levered to some exciting themes in what has long been viewed as a staid industry.
“Artificial intelligence will one day fill city streets with robocars, but that remains a distant vision. In farm communities, planters, sprayers, and combine harvesters could run themselves by the end of the decade. Already, powerful new software can hold down pesticide, fertilizer, and seed costs while raising crop output. That’s fueling gains for the likes of,” reported Jack Hough for Barron’s.
Those two stocks combine for over 9% of the MOO roster and agriculture equipment giant is the ETF’s third-holding. The aforementioned YUMY is relevant and potentially useful on this front as well because the fund is actively managed. That implies the fund can be more responsive to emerging agribusiness trends. Deere is YUMY’s largest holding.
For tactical investors seeking durable agribusiness exposure for the long haul, a case can be made the stars are aligning for both MOO and YUMY.
“Long term, rising protein demand worldwide bodes well for farmers. Most corn, like soybeans, goes to feed livestock, including laying hens. Biofuels such as corn ethanol are another big demand driver,” according to Barron’s.
Another possible spark for MOO is a nearly 4% weight to CNH Industrial, a Dutch firm that’s a pioneer in precision planting systems.
“The Precision Planting system, called 20|20, can diagnose field conditions in real time to keep planting depth the same across different soil conditions; optimize seed frequency for the amount of organic matter in soil; reduce fertilizer use where appropriate; and more,” concluded Barron’s.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
