Week 381 - Dividend-paying Production Agriculture Companies

Situation: Now we come to feeding the planet. Yes, row crops are a commodity so spot prices can go to extremes and stay there awhile. And yes, agricultural equipment makers can only sell product if farmers have money to spend. On the other hand, there have been improvements in satellite-based technology, 3rd party logistics, and financial services that dial back much of the risk introduced by weather. However, markets and prices have become sufficiently reliable that major countries no longer back up food supplies with large reserves. Similarly, investors are left to cope with consolidation brought on by global sourcing and improvements in planting and harvesting technologies. The supply chains for insecticides, herbicides, fungicides, and fertilizer have been disrupted to such a degree that companies have had to enter into wave after wave of cross-border merger & acquisition activity. To their credit, Dow Chemical and DuPont are US leaders in the Ag Chemical space who have merged without bringing in companies from other countries. Even DowDuPont will have to split into 3 companies in order to devote one enterprise to Ag Chemicals and Seed Development: Corteva Agriscience. 

Mission: Highlight the leading companies that support farm production by using our Standard Spreadsheet. Include beef, pork, and poultry processors that have a controlling interest in animal breeding and egg production facilities. Include IBM because it has a monopoly on weather satellites and owns The Weather Channel.

Execution: see Table.

Bottom Line: This is a dicey area for investors, even those who make a study of it. The good news is that the common stocks in all 10 companies remain reasonably priced (see Columns Y-AA), which is saying a lot.

Risk Rating: 8 (where 10-Yr US Treasury Notes = 1, S&P 500 Index = 5, gold bullion = 10)

Full Disclosure: I dollar-average into IBM and CAT, and own shares of HRL.

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