The VanEck Vectors/Agribusiness ETF (MOO) is higher by more than 17% this year and could add to those gains into year-end thanks to strength in corn prices.
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.
Fertilizer stocks are among the agribusiness names investors may want to consider and MOO features robust exposure to that segment. Some analysts are getting bullish on those names.
“Bank of America Merrill Lynch analyst Steve Byrne upgraded CF Industries Holding (ticker: CF) and Nutrien (NTR) to Buy from Neutral on Monday, noting that both stocks could benefit from an agricultural rebound. Byrne raised the target price on CF to $56 from $52, but trimmed Nutrien’s target price to $54 from $55,” reports Avi Salzman for Barron’s. “Byrne also rates fertilizer company Mosaic (MOS) at Buy, but trimmed the target price to $24 from $26.”
Fun With Fertilizer Stocks
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.
“After a year of markedly lower fertilizer prices, we believe fertilizer shares reflect particularly attractive buying opportunities given our expectation for a price inflection by Spring in all three major nutrients,” Byrne wrote. “Phosphate and potash inventories remain high, but strong demand in North America, Brazil, and India should facilitate quick drawdowns and increased purchasing.”
MOO debuted in August 2007, meaning it was able to participate in the latter stages of the commodity boom that lifted fertilizer stocks to stratospheric heights.
“Nitrogen, meanwhile, could benefit from a corn rebound. Corn production is expected to fall to 13.7 million bushels this year, down from 15.1 million bushels in 2016, as wet weather during the planting season caused farmers to plant less corn,” according to Barron’s. “But next year could be a different story, and companies that sell nitrogen and other fertilizers could benefit, Byrne argues.”
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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.