The VanEck Vectors Agribusiness ETF (MOO) is higher by nearly 20% this year, putting it on pace for one of its better annual performances in the past several years. The agribusiness ETF could be even better in 2020.
MOO seeks to replicate the price and yield performance of the MVIS® Global Agribusiness Index. 50% of the companies included in the index derive their revenues from agri-chemicals, animal health, and fertilizers, seeds, and traits, from farm/irrigation equipment and farm machinery, aquaculture and fishing, livestock, cultivation and plantations and trading of agricultural products.
MOO’s roster includes farm equipment and machinery makers in addition to fertilizer producers so it’s a diversified agribusiness play. Still, fertilizer exposure is potentially impactful going forward.
“Bad weather in parts of the Midwest prevented farmers from wrapping up their 2019 harvests on time, with more than 10% of corn acreage still unharvested in states like Ohio, Michigan, and North Dakota as of December 1, according to the U.S. Department of Agriculture (USDA),” said VanEck in a recent note. “Consequently, this should push out most fertilizer applications to the spring (2020). Furthermore, the fertilizer applications should be fairly sizable considering that the last robust applications happened in the spring of 2018.”
Mulling MOO in 2020
Fertilizer equities, including MOO holding Nutrien, are worth monitoring in the year ahead.
“We believe that this has implications for some of the well-known agribusiness companies, including the largest crop nutrient producer in the world, Nutrien,” according to VanEck. “The company produces nitrogen, potash and phosphate fertilizers and has a competitive edge in the U.S. with its large retail distribution network. That, coupled with the company’s mergers and acquisitions (M&A) pipeline for retail distributors in the U.S. and Brazil, gives us the conviction that the company is well positioned heading into 2020.”
Next year, corn and soybean prices could be flat, but predictability and stability could be positive for MOO components.
“As for crop prices, our conversations with farmers, agronomists and seed and fertilizer distributors point to flat corn and lower soybean prices in 2020 as more planted acres in the U.S., and aggressive seed pricing from mid-sized independent seed distributors, offset the positive effects from increasing global demand,” notes VanEck.
For more investing strategies, visit our Tactical Allocation Channel.
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.