In this piece, we will take a look at the ten best small cap agriculture stocks to buy. If you to skip our introduction of agriculture stocks and small cap investing, then head on over to 5 Best Small Cap Agriculture Stocks To Buy.
The agricultural commodities sector was one of the hardest hit last year in the wake of the Russian invasion of Ukraine. Russia and Ukraine are two of the largest exporters of wheat. To understand the impact of the invasion on the global wheat market consider the fact that the Chicago SRW Wheat Futures index jumped from 804 USX in February 2022 to a whopping 1,209 USX at the start of March for the highest value since 2012. This marked a roughly 50% increase and the elevated wheat prices contributed to inflation globally. During this same time period, wheat spot prices per bushel jumped to $12, a stunning increase from the $8 that they were trading at the start of February. This broke a 14 year record as the price had touched similar levels only in 2008
The price per bushel stabilized to 2021 levels only in April this year but recent trends might indicate that this is about to change. In fact, July 2023 was not a great month for the wheat market, as Russia pulled out of the Black Sea grain deal that allows for the export of Ukrainian grain. As July ends, wheat prices are on the upside once again after they bottomed out to roughly $6.5 in May.
In the wake of fresh uncertainty on the Ukrainian front, the S&P GSCI Agriculture index is up 5.45% in July, even as it remains in the red for the year. And due to its importance, just like crude oil, the agriculture industry is one of the biggest in the world. Research shows that this segment was worth $11 trillion in 2021 and through a compounded annual growth rate (CAGR) of 9.4%, it was projected to grow and sit at $12.1 trillion by the end of 2022. Growth in the global population is expected to be a stimulant to the sector, but trade disruptions such as the ones we've shared above remain a lingering concern. We've also made a list of the biggest agriculture companies in the world, in which the top three firms are Nutrien Ltd. (NYSE:NTR), Corteva, Inc. (NYSE:CTVA), and Bunge Limited (NYSE:BG).
The growing global population, while providing a significant growth in the market for the agriculture industry, will also strain its ability to use resources to keep up with the output. Research from the Harvard Business Review shows that the human population is projected to touch 10 billion by 2050. This development is expected to grow global food demand by as much as 98%. Yet, since the agriculture sector is water intensive, it might find difficulty in sourcing adequate water to keep up with production needs, especially since food production will have to grow by at least 50% to keep up with demand.
So, it's clear that agriculture companies are not going out of business anytime soon. And, the trends of the future might even enable some small companies right now to become giants as the demand for food grows. One stock market segment where one can hunt for such stocks is the small cap category. This is made up of firms that have a market capitalization ranging between $200 million to $2 billion. It is also often made up of large foreign companies whose shares trade on major American stock indexes such as the NYSE and the NASDAQ.
Investing in small caps has its advantages and disadvantages. For instance, the stocks are priced quite low which provides an attractive entry point and the potential for large percentage gains. At the same time, this can also cause hefty losses which are made worse by an il-liquid market where there aren't enough buyers of the shares. Additionally, a crucial facet of small cap investing is the need to avoid scams. Pump and dump scams work by rapidly increasing the share price and driving gullible investors to purchase the shares. However, the stock is dumped by the scammers later, who then end up profiting while others take a loss.
We continue to believe that global grain and oilseed markets need two consecutive normal crop years to stabilize global supplies and it’s too early to tell whether this year will be a year of rebuilding. We expect these trends to continue throughout the year, given current commodity prices and the fact that productivity on the farm from top ag technologies is the best way for farmers to manage their businesses. Turning to the U.S. planted area, we expect farmers to plant 92 million acres of corn, up 4% year-over-year and around 88 million acres of soybeans essentially flat year-over-year. Projected farmer incomes are strong in 2023 though slightly lower than 2022 and the record we saw in 2021. Finally, when we look at the Brazil market, the farmer is financially healthy, investing in maximizing crop production and all indications are that they will plant more soybeans and safrinha corn this coming season than they did last year.
With these details in mind, let's take a look at some of the best agriculture stocks, out of which the top picks are The Andersons, Inc. (NASDAQ:ANDE), Compass Minerals International, Inc. (NYSE:CMP), and Dole plc (NYSE:DOLE).
10 Best Small Cap Agriculture Stocks to Buy
Our Methodology
To compile our list of the top small cap agriculture stocks, we first ranked the biggest small cap agriculture companies by their market value. Then, the number of hedge fund investors that had invested in the stock was determined through Insider Monkey's Q1 2023 database of 943 hedge funds and the top firms were as follows.
CVR Partners, LP (NYSE:UAN) is an American firm that sells nitrogen fertilizer. The company has beaten analyst earnings per share estimates in two out of its last four quarters and the average analyst rating for the shares is a Hold.
By the end of this year's first quarter, three of the 943 hedge funds part of Insider Monkey's database had invested in CVR Partners, LP (NYSE:UAN). Out of these, the firm's largest shareholder is Thomas Clay's Epacria Capital Partners with a $1.1 million stake.
Just like Compass Minerals International, Inc. (NYSE:CMP), The Andersons, Inc. (NASDAQ:ANDE), and Dole plc (NYSE:DOLE), CVR Partners, LP (NYSE:UAN) is a great small cap agriculture stock according to hedge fund sentiment.
Bioceres Crop Solutions Corp. (NASDAQ:BIOX) provides seeds, herbicides, fungicides, and other crop and farming related products. Out of the ten analyst notes that covered the shares in May and June, four rated the stock as a Strong Buy with the average share price target being $25.30.
Seven of the 943 hedge funds part of Insider Monkey's Q1 2023 database had bought the firm's shares. Bioceres Crop Solutions Corp. (NASDAQ:BIOX)'s largest shareholder is Craig Peskin and Peter Fleiss's Solel Partners with an investment worth $53 million.
Intrepid Potash, Inc. (NYSE:IPI), as the name suggests, is a potassium company. It sells potassium fertilizers to the agriculture sector. The company is facing a tough time as of late since it has missed analyst EPS estimates for all of its four recent quarters and the average share rating teeters on the edge of Under Perform but is Hold on average.
As of March 2023, eight of the 943 hedge funds surveyed by Insider Monkey had held a stake in Intrepid Potash, Inc. (NYSE:IPI). Aaron Weitman's CastleKnight Management is the biggest investor among these, with a $5.6 million investment.
Fresh Del Monte Produce Inc. (NYSE:FDP) sells fruits and vegetables all over the world. The firm scored a win in late July when it received recognition for reducing greenhouse gas emissions and a certified carbon neutral pineapple.
After digging through 943 hedge funds for their first quarter of 2023 shareholdings, Insider Monkey discovered that nine had invested in the firm. Fresh Del Monte Produce Inc. (NYSE:FDP)'s largest stakeholder in our database is Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital with a $7.9 million stake.
Adecoagro S.A. (NYSE:AGRO) is a diversified agriculture company that grows and sells a variety of crops such as wheat, cotton, soybeans, and peanuts. The shares have been on a tear this year, having registered 42.78% in gains year to date.
By the end of this year's first quarter, 11 of the 943 hedge funds part of Insider Monkey's database had held Adecoagro S.A. (NYSE:AGRO)'s shares. William Duhamel's Route One Investment Company is the largest shareholder through an investment of $105 million.
The Andersons, Inc. (NASDAQ:ANDE), Adecoagro S.A. (NYSE:AGRO), Compass Minerals International, Inc. (NYSE:CMP), and Dole plc (NYSE:DOLE) are some great small cap agriculture stocks.
