The Zacks Agriculture - Products industry will benefit from the stable demand for food, supported by an increasing population. Rising consumer awareness regarding food ingredients and the preference for healthier options will drive industry expansion. Alternative and innovative agricultural technologies, such as hydroponics and vertical farming, are expected to serve as significant growth drivers due to their inherent advantages.
Companies like CalMaine Foods CALM, The Andersons, Inc. ANDE, GrowGeneration GRWG and Hydrofarm HYFM are poised to gain from strong end-market demand and their ongoing growth initiatives aimed at capitalizing on these trends.
Industry Description
The Zacks Agriculture – Products industry comprises companies that are either involved in storing agricultural commodities, distributing ingredients to others or engaged in farming crops, livestock and poultry products. Some are associated with purchasing, storing, transporting, processing and selling agricultural commodities or products derived from the same. They operate grain elevators, wherein income is generated from commodities bought and sold using these elevators or held as inventory. Some companies provide nutrients, advanced indoor and greenhouse lighting, environmental control systems, and accessories for hydroponic gardening — the method of growing plants using mineral nutrient solutions in a water solvent instead of soil. A few players offer innovative, plant-based health and wellness products. Companies producing lumber also fall under this industry.
Trends Shaping the Future of the Agriculture - Products Industry
Solid Demand to Support Industry: The demand for food is directly influenced by population and demographic changes beside income growth and income distribution. Per the United Nations, the global population will rise to 8.5 billion in 2030 and 9.7 billion in 2050. This would lead to a 50% increase in global food demand. In response to growing consumer demand for healthier food alternatives, several agricultural and food-based companies are investing in innovation, and augmenting their product and market strategies to bring new quality and healthy food ingredients to the market. Ongoing improvements in grain-handling techniques and investment in larger storage spaces will likely support the industry. Plus, stable earnings across all cycles are ensured, considering the industry’s products are always in demand, irrespective of the condition of the economy.
Hydroponics & Cannabis Act as Key Catalysts: Hydroponics is gaining popularity as it gives growers the ability to regulate and manage nutrient delivery, light, air, water, humidity, pests and temperature in an indoor setting. This method enables faster crop growth, with higher yields than traditional soil-based cultivation. It is being utilized in new and emerging industries, including the cultivation of cannabis and hemp. Vertical farms producing organic fruits and vegetables also utilize hydroponics due to the shortage of farmland and environmental vulnerabilities. Vertical farming is the latest agricultural technology, wherein shelves and artificial lighting systems are used to grow produce, thereby minimizing land and water usage. The global hydroponic market is expected to reach $17.3 billion in 2025 and grow thereafter, seeing a CAGR of 13.7% to $28.95 by 2029. Even though the cannabis industry is undergoing a rough patch due to an oversupply, its long-term prospects remain intact. In the United States, several states have legalized cannabis for medical or recreational use, making it the largest market in the world. Spending on legal cannabis is projected to increase at a steady pace each year in North America and reach $57 billion by 2028.
Cost-Saving Actions to Aid Margins: Players in the industry are facing rising labor, packaging and distribution costs, among others. Companies engaged in animal products have been facing increasing production costs for a while due to elevated feed ingredient prices. However, feed prices have eased lately. The industry continues to navigate a tight labor market with a spike in wages and higher distribution costs. They have been making efforts to bolster their financial conditions, conserve cash and improve profitability by implementing pricing and cost-reduction actions to sustain margins. However, the economic uncertainty stemming from tariffs and retaliatory tariffs poses challenges for industry players. As the third-largest importer of U.S. agricultural products, China’s decision to impose a 34% tariff on all U.S. goods is likely to have a significant negative impact on the industry.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Agriculture - Products industry is part of the broader Zacks Basic Materials sector. The industry currently carries a Zacks Industry Rank #59, which places it in the top 24% of the 247 Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bright prospects in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks worth considering for your portfolio, let us look at the industry’s recent stock market performance and valuation.
Industry Versus Broader Market
The Zacks Agriculture – Products industry has outperformed its sector but lagged the Zacks S&P 500 composite over the past 12 months. Stocks in this industry have moved down 18.3% in the past 12 months compared with the S&P 500’s 2.2% dip. The Basic Materials sector has declined 20.3% in the same timeframe.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA ratio, a commonly used multiple for valuing Agriculture - Products stocks, we see that the industry is currently trading at 5.49X compared with the S&P 500’s 14.93X. The Basic Materials sector’s trailing 12-month EV/EBITDA is 10.85X. This is shown in the charts below.
Enterprise Value/EBITDA (EV/EBITDA) Ratio (TTM)
Enterprise Value/EBITDA (EV/EBITDA) Ratio (TTM)
Over the last five years, the industry traded as high as 10.19X and as low as 3.22X, the median being 5.14X.
4 Agriculture - Products Stocks to Keep an Eye on
CalMaine Foods: The outbreak of the highly pathogenic avian influenza (HPAI) in U.S. poultry flocks has boosted egg prices, which bodes well for the company. The preference for specialty eggs (including cage-free eggs) continues to surge, driven by state mandates and consumer preference. Consumers are also willing to pay premium prices for these products. Specialty eggs, thus, remain a focal point for CalMaine Foods’ growth strategy. It has earmarked $60 million in new capital projects for the expansion of cage-free capacity. The company is also expanding its product portfolio to include value-added egg products. This is evident in its investment in Meadowcreek Foods, LLC, for hard-cooked eggs and Crepini Foods, a new venture offering egg products and prepared foods. CalMaine expects to leverage the Crepini brand of quality products, including egg wraps and protein pancakes, to extend its reach to major retailers.
Ridgeland, MS-based CalMaine Foods is the largest producer and distributor of fresh shell eggs in the United States. The Zacks Consensus Estimate for CALM’s earnings for fiscal 2025 indicates a year-over-year surge of 300.5%. The estimate has moved north by 46% over the past 60 days. CALM currently flaunts a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: CALM
Andersons: Backed by its strong cash flow, the company continues to add to its core grain and fertilizer verticals, including a greater focus on renewables and opportunities in renewable diesel feedstocks. ANDE recently made an $85-million investment for a 65% ownership interest in Skyland Grain, LLC, which operates a large grain and agronomy footprint and is spread across Southwest Kansas, Eastern Colorado and the Texas and Oklahoma panhandles. These assets extend ANDE’s geographic presence. In December 2024, the company announced some organization alignment changes that will help drive operational efficiencies and synergies, serve customers even better, and continue to drive growth. Backed by its balanced product portfolio and well-positioned grain and agronomy assets, the agribusiness segment (which will now consist of the Trade, and Nutrient and Industrial segments) is expected to witness steady earnings. Its disciplined capital allocation strategy bodes well. ANDE’s long-term capital projects to lower the carbon intensity of ethanol plants are expected to lead to positive financial results.
Maumee, OH-based Andersons operates in trade, renewables and plant nutrient sectors in the United States and internationally. The Zacks Consensus Estimate for ANDE’s earnings for fiscal 2025 has moved up 5% in the past 60 days. Andersons currently sports a Zacks Rank of 1.
Price & Consensus: ANDE
GrowGeneration: The company announced the official launch of its B2B Pro Portal, its state-of-the-art e-commerce platform. The portal is designed to streamline purchasing for commercial cultivators and retailers. The Pro Portal represents the newest advancement in GrowGeneration’s digital transformation of sales, prioritizing a B2B customer-centric approach. GRWG has completed its strategic restructuring plan to drive long-term profitability, and advancing growth initiatives focused on key areas, such as proprietary brands, B2B and e-commerce. The plan also includes improvements in inventory management, sales and marketing activities, and other aspects of operations. These actions are expected to lower annual costs by $12 million, improve margins and deliver long-term profitability. The company’s acquisition strategy focused on acquiring well-established, profitable hydroponic garden centers and proprietary brands, and private-label brands bodes well.
Greenwood Village, CO-based GrowGeneration owns and operates retail hydroponic and organic gardening stores in the United States. The Zacks Consensus Estimate for the company’s fiscal 2025 bottom line is pegged at a loss of 43 cents per share, suggesting a narrower loss from the 66 cents incurred in fiscal 2024. GRWG currently carries a Zacks Rank #3 (Hold).
Price & Consensus: GRWG
Hydrofarm: The company is focused on streamlining operations, reducing costs and improving efficiencies. Its focus on proprietary brands has increased its sales mix of higher-margin proprietary brands from approximately 35% in 2020 to 56% in 2024. Hydrofarm expects to deliver gross margin expansion in 2025, aided by a higher proprietary brand sales mix, and anticipated gains from its restructuring and related productivity initiatives carried out in 2024, along with new cost savings plans for 2025. The company has been expanding its reach to serve non-cannabis controlled-environment applications, including food, floral, and lawn and garden. These revenue diversification efforts and focus to grow e-commerce will also aid growth.
Shoemakersville, PA-based Hydrofarm engages in the manufacturing and distribution of controlled-environment agriculture equipment and supplies in the United States and Canada. The Zacks Consensus Estimate for HYFM’s 2025 bottom line has been unchanged at a loss of $9.40 per share. It indicates an improvement from the loss of $14.51 per share reported in 2024. HYFM currently carries a Zacks Rank of 3.
Price & Consensus: HYFM
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
