Agriculture may not be synonymous with innovation in today's economy, but consider this: The United States planted fewer acres of corn in 2017 than it did in 1927, but produced eight times as many bushels. Steadily climbing yield on American farms has been made possible through innovative tools spanning genetic engineering, pest management, and even machine learning climate prediction tools.
Contrary to popular belief, relatively little corn becomes human food directly. Instead, the incredible production gains in the last century were necessary to meet rising demands in animal feed and ethanol applications. Then again, when annual production is measured at nearly 13 billion bushels, it shouldn't be too surprising that the crop creates massive downstream markets for value-added products.
This should serve as a reminder not to overlook corn stocks. The leading companies in the space are large (a requirement to compete in any commodity market), boast sizable cash flows, and even have growth opportunities on the horizon. If you're interested in investing in one of America's top industries, then consider buying food ingredients leader Ingredion (INGR 0.24%), diversified ethanol manufacturer Green Plains (GPRE -0.93%), and Archer Daniels Midland (ADM 0.56%).
Ingredion, formerly Corn Products, is a leading supplier of corn-based sweeteners and starches, also known as the 12% of American corn that goes directly to human food applications. It posted nearly identical annual revenue totals from 2014 to 2016, although slightly rising revenue in the second and third quarters of 2017 provides hope that the company can break that stagnant cycle.
Ingredion has a long-term goal of generating 35% of its revenue from high-margin specialty ingredients, up from 28% today. Meanwhile, it's exploring opportunities to expand in higher-growth markets in South America and Asia, which could provide a significant boost considering 61% of sales are sourced from customers in North America. Long story short, the company may be trading at all-time highs, but food and beverage companies will always need sweeteners and starches. That makes this a top corn stock.
Green Plains chooses to upgrade the value of corn a bit differently than Ingredion, but that didn't work out in 2017. Well, I think Wall Street simply isn't giving the stock the credit it deserves, although that may end this year. The "problem" is that the company is North America's second-largest ethanol producer, so it gets treated like one. But that simplistic analysis fails to recognize the diversification efforts of the last two years.
Consider that Green Plains is now the world's leading manufacturer of vinegar (corn makes ethanol, ethanol makes vinegar) and can be found in household brands including Heinz Ketchup and Windex. It's also the nation's fourth-largest cattle feedlot operator (corn byproducts from ethanol manufacturing become animal feed) with a long-term offtake agreement with Cargill.
It's been easy to punish ethanol producers lately, especially considering the unusual level of political uncertainty encountered in 2017 and weak margins from a glut of supply. Then again, that's the point of diversifying into higher-margin products, but Wall Street has yet to reward the company's successful de-risking efforts. That presents a big opportunity in my opinion: The corn stock is historically cheap and boasts a 2.8% dividend yield.
Archer Daniels Midland offers an integrated stack of corn products spanning the entire value chain, from raw and processed agricultural products to specialty food ingredients. The company struggled a bit in 2017 in a tough global operating environment, but its corn processing segment was the only one of the five to post year-over-year gains in operating income through the first nine months.
The segment grinds 72 million bushels of corn per month and tracks the performance of corn processing, sweeteners and starches, and ethanol production. In fact, the company is the largest ethanol producer in the world with 1.7 billion gallons of annual capacity. That's not where its fermentation prowess ends, either. Archer Daniels Midland upgrades some of its corn into industry-leading fish feed for aquaculture applications with its industrial biotech infrastructure. Similar development-stage ingredients could reach the market in the coming years. It's also about to convert some of its fuel ethanol capacity into high-margin beverage alcohol production assets.
The good news is that a rough 2017 could have been much worse if not for the company's margin boosting activities in recent years. Better yet, the increased operational efficiency throughout the portfolio provides an advantageous position for when market conditions begin improving. Until then, investors in this corn stock can sit back and enjoy a business oozing with cash flow, the 3.1% dividend yield, and a relatively cheap market valuation.
Agriculture isn't the most exciting industry, but it's vital to any thriving economy. America's world-leading corn market is ripe with opportunities for investors who look in the right places. The key is to find businesses upgrading the value of corn ingredients that offer reasons to stick around for the long haul, be it value, growth, income, or any combination of the bunch. That's why I think Ingredion, Green Plains, and Archer Daniels Midland are top corn stocks to consider buying.
Bunge Limited operates as an agribusiness and food company worldwide. It operates through four segments: Agribusiness, Refined and Specialty Oils, Milling, and Sugar and Bioenergy. The Agribusiness segment purchases, stores, transports, processes, and sells agricultural commodities and commodity products, including oilseeds primarily soybeans, rapeseed, canola, and sunflower seeds, as well as grains comprising wheat and corn; and processes oilseeds into vegetable oils and protein meals.
Ingredion Incorporated, together with its subsidiaries, produces and sells sweeteners, starches, nutrition ingredients, and biomaterial solutions derived from wet milling and processing corn, and other starch-based materials to a range of industries in North America, South America, the Asia Pacific, Europe, the Middle East, and Africa. The company offers starch products for use in a range of processed foods; cornstarch; specialty paper starches for enhanced drainage, fiber retention, oil and grease resistance, improved printability, and biochemical oxygen demand control; starches and specialty starches for textile industry; industrial starches are used in the production of construction materials, textiles, adhesives, pharmaceuticals, and cosmetics, as well as in mining and water filtration; and specialty industrial starches for use in biomaterial applications, including biodegradable plastics, fabric softeners and detergents, hair and skin care applications, dusting powders for surgical gloves, and in the production of glass fiber and insulation. It provides sweetener products comprising glucose syrups, high maltose syrup, high fructose corn syrup, dextrose, polyols, maltodextrin, glucose syrup solids, and non-genetically modified organism syrups for use in food and beverage products, such as baked goods, snack foods, canned fruits, condiments, candy and other sweets, dairy products, ice cream, jams and jellies, prepared mixes, table syrups, soft drinks, fruit-flavored drinks, and others.
Tate & Lyle PLC, together with its subsidiaries, provides ingredients and solutions to the food, beverage, and other industries in the United States, the United Kingdom, other European countries, and internationally. It operates through three segments: Food & Beverage Solutions, Sucralose, and Primary Products. The company offers texturants; nutritive sweeteners, such as high fructose corn syrup and dextrose; health and wellness ingredients; and stabilizers.
Tate-and-Lyle PLC ADR stock opened the day at $38.79 after a previous close of $38.79. The latest price was $38.79 (25-minute delay). Tate-and-Lyle PLC ADR is listed on the OTCQX (a marketplace for buying and selling "over the counter" stocks which aren't listed on a formal stock exchange), has a trailing 12-month revenue of around USD$1.6 billion and employs 4,591 staff.
Origin Agritech Limited, together with its subsidiaries, operates an agricultural biotechnology in the People's Republic of China. The company engages in crop seed breeding and genetic improvement activities. Its products include corn, soyabean, canola, and rice seeds.
Long-term investors looking for stable, mature businesses may be overlooking an investment hiding in plain sight: corn stocks. Given the broad definition of the term, it may be best for investors to focus on companies that can meet your portfolio's unique needs. These top corn stocks offer growth, value, or both.
Each company address pain points for the three major applications for corn: fuel ethanol, animal feed, and human food ingredients. That's what makes these great candidates for the top five corn stocks to buy right now.
With combined sales of $104 billion, Archer Daniels Midland and Bunge are among the largest agribusiness companies in the world. They generate business from storing, processing, and transporting various agricultural products around the globe. While that includes sugarcane and soybean, among other crops, both depend heavily on corn harvests for substantial parts of their revenue and profits.
For instance, Archer Daniels Midland generated $592 million in operating income from its agricultural services and corn processing business segments in the first half of 2017, which represented 45% of total operating income. That would have been higher if not for weakness in the ethanol industry.
The company is one of the top three corn ethanol producers in the United States with over 1 billion gallons per year of annual manufacturing capacity. However, it recently announced that it will begin recalibrating at least one facility to focus on food ethanol (alcohol) instead of fuel ethanol. That could lead to higher margins and, perhaps, provide a low-risk way to address weakness in fuel markets. 781b155fdc