After a hectic earnings-driven month, it's becoming increasingly clear that one industry is bucking the economic gloom: agriculture.
With most agricultural players -- be it fertilizer makers or equipment makers -- making good money in spite of the gloom, let's take a look at what's driving the agriculture boom and which stocks could help grow our portfolios
What is working for the sector?
No guesses here. Sky-high crop prices have been driving the world crazy, and the farming community has been happily pocketing the gains. The higher the prices, the higher the demand for fertilizer and equipment, and the higher the sales for related companies -- the equation is as simple as that. And it's not just crops. Prices for meat and dairy products have also hit high levels this year.
Bad weather is another factor to be accounted for. On the one hand it can hurt yield, but on the other, it helps boost crop prices because of the tighter supply. For instance, severe weather hampered cultivation in some areas for chemical player Agrium
Now that you know what's working for the agriculture sector, let me give you the lowdown on how some of the agriculture-related businesses have performed in their most recent quarters. It's eye-opening.
One of the companies that quickly springs to mind whenever you think of agriculture is Deere
Deere is eyeing expansion and has also raised its quarterly dividend. Worth a watch, isn't it?
CNH's debt-to-equity ratio may be high at 203%, but its expansion plans justify taking on so much debt. Considering the strong quarterly numbers, CNH is definitely enjoying the agriculture boom.
Help those plants
Fertilizers may be toxic to us, but they help plants -- and sales. Higher farming activity across the globe has boosted demand for nutrients and minerals that boost farm produce, and most fertilizer companies have reported hot numbers recently.
Fertilizer companies found another reason to cheer recently, when Asia's third largest economy India agreed to import potash (a key nutrient with a tight market) at the currently prevailing high prices, something the country has not been willing to do for months. While the three big potash players -- Agrium, PotashCorp
Food companies also benefit from an uptick in agricultural activity.
Trade resumption in Russia has brought with it potential expansion opportunities for the food companies. Bunge is interested in the region, and so is Archer Daniels Midland
Clearly, these companies are reaping the benefits of agriculture.
The Foolish bottom line
With business strong even in the face of an economic downturn, agriculture stocks look like a good bet. Moreover, with a growing global population, demand for food has the wind at its back.
Even if fertilizer prices come down on higher supplies, demand might pick up, boosting sales volumes for the companies. Hence, all might not be lost even if prices were to cool down.
Keep tabs on these companies by adding them to your watchlist.