I firmly believe that the commodity price cycle still exists and that agriculture is going to be a key asset for stock market investors over the next decade. We’ve already had a terrible drought this year that affected agricultural commodities, but the global business cycle in terms of supply and demand is still promising for agribusiness and agriculture stocks.
One agriculture stock that’s been a real standout this year is Bunge Limited (NYSE/BG), and I bet it’s a company you’ve never heard of. On the stock market, Bunge has been rocketing higher since April, and one look at the company’s financial results tells the story.
Bunge is in the business of transporting and processing agricultural commodities. The company is based in White Plains, New York, with global operations at the wholesale and retail levels. It has approximately 35,000 employees in more than 40 countries and is a well-known player in global agribusiness.
The company originates oilseeds and grains from the world’s primary growing regions and transports them to customers worldwide. Bunge also crushes oilseeds for the livestock industry; produces bottled oils, mayonnaise, margarines, and other food products for consumers; crushes sugarcane to make sugar and ethanol; mills wheat and corn for food processors, bakeries, brewers, and other commercial customers; and sells fertilizer to farmers in North and South America. (Source: “Company: About Bunge,” Bunge Limited, last accessed November 6, 2012.) You name it; if it’s related to agricultural commodities, Bunge is likely involved in the process.
The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
According to Bunge, its 2012 third-quarter revenues grew to $17.3 billion, up from $15.6 billion in the third quarter of 2011. Net income attributable to Bunge was $297.0 million in the latest quarter, up from $140.0 million in the comparable quarter. (Source: “Bunge Reports Third Quarter Results,” Bunge Limited, October 25, 2012.)
As an agriculture stock, Bunge has been pretty flat on the stock market since the financial crisis. Only recently has the position meaningfully accelerated on the stock market, rising to its current level of around $73.00 a share, up from $57.00 in early June.
Large-cap companies operating in multiple businesses like Bunge dominate agriculture stocks. Many of them pay dividends to shareholders, but most have mixed track records on the stock market. Agrium Inc. (NYSE/AGU) has one of the best long-term track records for an agriculture stock. (See “One of the Best Things Going in the Main Street Economy Today.”) As a group, the track records aren’t consistent.
I think some exposure to select agriculture stocks will turn out to be a good move, seeing how the commodity price cycle is playing out in this sector. In an age of austerity, stable businesses on the stock market are the most attractive.