The Zacks Agriculture – Operations industry faces challenges such as fluctuating commodity prices, rising input costs, trade uncertainties and growing operational expenses. These pressures affect productivity, profitability and long-term sustainability, posing hurdles for industry participants.
However, the industry is set to benefit from innovation and rising demand for healthy products. Investments in acquisitions, joint ventures and expansions are expected to boost growth, while advancements in assets and technology enhance innovation and customer service for players like Archer Daniels Midland ADM, Adecoagro AGRO, Mission Produce AVO, Calavo Growers CVGW and Alico ALCO.
About the Industry
The Zacks Agriculture – Operations industry comprises companies that produce or procure, transport, store, process and distribute agricultural commodities to consumers. It also distributes ingredients to other parts of the agriculture industry (including clothing, animal feed, energy and industrial products). Some industry players engage in dairy operations, land transformation activities and the development of food ingredients using gene-editing technology. The industry encompasses production activities related to the traditional farming of crops (like corn, soybean, wheat and cotton), and livestock and poultry products (including meat, dairy and eggs). The products are mainly sold at grocery stores or exported overseas. These are also used as feedstock for other industries. For example, cotton is used in the clothing industry and corn is used in the ethanol industry.
Factors Shaping the Future of Agriculture - Operations Industry
Agricultural Export/Import Projections: The U.S. Department of Agriculture (USDA) projects agricultural exports of $169.5 billion for fiscal 2025 (ending Sept. 30, 2025), down slightly more than 2% from the revised fiscal 2024 forecast. This decline, driven by lower unit values for soybeans, corn and cotton, along with reduced beef volumes, is expected to significantly impact U.S. farmers. Meanwhile, imports are projected to reach $212 billion, widening the trade deficit to $42.5 billion. Additionally, low commodity prices are anticipated to continue limiting profit opportunities for farmers.
Elevated Costs: Agricultural companies face rising costs due to fluctuating commodity prices, inflation-driven input increases and trade uncertainties, all of which are squeezing profitability. Inflation-driven surges in input costs are significant challenges, raising production expenses and narrowing margins. To combat these pressures, companies have adopted pricing strategies and improved supply-chain resilience through partnerships and distribution initiatives. However, commodity cost inflation is expected to persist, maintaining pressure on margins in the near term.
Additionally, companies are managing higher SG&A expenses, driven by performance-related compensation, project costs and technology investments to stay competitive. These elevated operating expenses and ongoing SG&A deleverage may continue to weigh on profitability.
Organic Products & Innovation in Focus: The industry has gained from rising consumer demand for healthier food, prompting a shift toward organic farming practices, and reduced use of chemicals and pesticides. Innovations in food processing, enhanced grain-handling techniques, increased storage capacity and strong demand from emerging markets are driving growth. As healthy eating trends expand, alternative protein consumption is expected to rise. To align with trends in food security, health and well-being, industry players are prioritizing productivity and innovation. Companies are also investing in acquisitions and joint ventures to create high-quality ingredients and solutions that meet the growing demand for healthy products.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Agriculture – Operations industry is within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #151, which places it in the bottom 40% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries resulted from a negative aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, analysts are gradually losing confidence in this group’s earnings growth potential.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and valuation picture.
Industry vs. Broader Market
In a year, the Zacks Agriculture – Operations industry has underperformed the S&P 500 and outperformed the Zacks Consumer Staples sector.
The stocks in the industry have collectively fallen 3.4% in a year against growth of 25.6% for the Zacks S&P 500 composite. Meanwhile, the sector has declined 3.6% in the past year.
One-Year Price Performance
Agriculture - Operations Industry's Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing Consumer Staples stocks, the agriculture – Operations industry is currently trading at 13.63X compared with the S&P 500’s 22.23X and the sector’s 16.25X.
Over the last five years, the industry traded as high as 17.3X, as low as 10.91X and at the median of 14.07X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Agriculture Operations Stocks to Keep an Eye on
One stock in the Zacks Agriculture – Operations universe currently sports a Zacks Rank #1 (Strong Buy), whereas none have a Zacks Rank #2 (Buy). Thus, we have suggested four stocks with a Zacks Rank #3 (Hold) from the same industry, which investors may hold on to. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mission Produce: This Oxnard, CA-based company is engaged in sourcing, farming, packaging, marketing and distribution of avocados, mangoes and blueberries to food retailers, distributors and foodservice customers in the United States and internationally. By effectively integrating its sales operations with sourcing teams, the company has demonstrated an exceptional ability to meet customer demand while optimizing per-unit margins. This alignment allows Mission Produce to leverage a sustained higher pricing environment, ensuring profitability and consistent performance in its Marketing and Distribution segment.
The Zacks Consensus Estimate for Mission Produce’s fiscal 2024 earnings has moved up 44.8% in the past 30 days. The Zacks Consensus Estimate for its fiscal 2024 sales and earnings suggests declines of 14.5% and 43.2%, respectively, from the year-ago period’s reported figures. The Zacks Rank #1 company has delivered a significant earnings surprise, on average, in the trailing four quarters. The AVO stock has risen 24.1% in the past year.
Price and Consensus: AVO
Archer Daniels: This Chicago, IL-based agricultural product company’s leadership in critical global trends, such as flexitarian diets, nutrition and sustainable materials, has contributed to its momentum. Its focus on investing in assets and technological capabilities to serve customers efficiently is likely to be a significant growth driver. Solid demand, improved productivity and product innovations have been driving growth. Its Readiness program, positive cash flow and solid performance at the Nutrition unit have been aiding the results. The Zacks Rank #3 company has been progressing well on its three strategic pillars — optimize, drive and growth.
Archer Daniels is poised to benefit from the robust performance of its Nutrition segment, owing to significant gains in the Human and Animal Nutrition units. The Zacks Consensus Estimate for Archer Daniels’ 2025 earnings has declined 2.6% in the past 30 days to $4.54 per share. The Zacks Consensus Estimate for ADM’s 2025 sales suggests growth of 0.2% from the year-ago period’s reported figure. It delivered a negative earnings surprise of 6.5%, on average, in the trailing four quarters. The company has lost 25.8% in the past year.
Price and Consensus: ADM
Adecoagro: This Luxembourg-based agro-industrial company engages in farming crops and other agricultural products, dairy operations, sugar, ethanol and energy production, and land transformation activities in South America. AGRO benefits from high asset flexibility, which gives it a competitive advantage in the current uncertain market outlook. Its flexibility is reflected in its ability to increase the mix of anhydrous ethanol to benefit from its high prices and recovering demand. The company’s Farming and Land Transformation businesses have been benefiting from consolidating the five-year plan investments made in Crops, Rice and Dairy businesses, along with its focus on efficiencies.
The Zacks Rank #3 company’s shares have declined 2.7% in the past year. The Zacks Consensus Estimate for AGRO’s 2025 earnings has been unchanged in the past 30 days. The Zacks Consensus Estimate for the company’s 2025 sales and EPS suggests growth of 4.2% and 14.3%, respectively, from the year-ago period’s reported figures.
Price and Consensus: AGRO
Calavo Growers: This Santa Paula, CA-based company is a global leader in the avocado industry and a growing provider of value-added fresh foods. It sources and markets a variety of fresh produce, including tomatoes and tropical fruits, under the Calavo brand, proprietary sub-brands, private labels and store brands. The company serves retail grocers, foodservice, club stores, mass merchandisers, food distributors and wholesalers worldwide.
The Zacks Consensus Estimate for CVGW’s fiscal 2024 earnings has been unchanged in the past 30 days. The Zacks Consensus Estimate for its fiscal 2024 sales and earnings suggests growth of 5.1% and 24.1%, respectively, from the year-ago period’s reported figures. The Zacks Rank #3 company delivered an earnings surprise of 13.2%, on average, in the trailing four quarters. The CVGW stock has declined 9.3% in the past year.
Price and Consensus: CVGW
Alico: The Fort Myers, FL-based agri-business and land management company is poised to benefit from the strong consumption of not-from-concentrate orange juice by retail consumers, which has been sturdy. This has significantly aided market pricing for Early and Mid-Season, and Valencia season fruit. Driven by the strong consumption of not-from-concentrate orange juice and lower-than-normal levels of processor inventories, the company expects market prices in the next year to be near or above the recent levels.
The Zacks Consensus Estimate for the current fiscal year’s loss has been unchanged at 37 cents in the past 30 days, whereas the company reported a loss of $3.49 in the year-ago period. The Zacks Consensus Estimate for ALCO’s current fiscal-year sales suggests a decline of 49.8% from the year-ago reported quarter. The ALCO stock has rallied 13.5% in the past year. The company carries a Zacks Rank #3 at present.
Price and Consensus: ALCO
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