Have shares in agriculture companies mirrored the defensive qualities of farm commodities themselves during the Covid-19 pandemic?
It doesn’t look that way, Agrimoney analysis of share prices in some major ag groups shows.
After a bit of underperformance in the first month after the outbreak, ag groups traded more in step with other shares over the second month, as the disease – and worries about it – spread from China. (Not that trading in line is saying much.)
It is more difficult to gauge trends in ag companies than in farm commodities, given the individual nature of businesses, with the fourth-quarter results season adding an extra layer of complication.
Debt levels and cash reserves, for instance, will be an important factor as investors focus on how well prepared companies are for the business hiatus caused by the lockdowns and travel bans prompted by coronavirus.
But it is possible to gauge one notable area of outperformance - Australia, which accounts for half of the top six performers over the past month.
That tallies with the return of rains, which has injected new life into an Australian ag sector which has grappled in some areas for three years with drought.
The country’s benchmark eastern young cattle indicator, for instance, set record highs during the period, as improved pasture spurred restocking, and the feedyard sector found itself in competition for animals.
Sugar turns sour
By contrast, sugar groups underperformed last month, as prices of the sweetener fell to earth alongside oil prices.
(Lower oil prices, in depressing ethanol prices, encourage cane crushers to switch more crop to producing more sugar rather than the biofuel, with a dampening effect on values of the sweetener too.)
Palm oil companies have, on the whole, fared badly too, with the vegetable oil, as a major biodiesel feedstock, also feeling the weight of the oil price collapse.
Another trend which could be emerging is resilience among companies with large portfolios of farmland – considered by many investors as akin to gold, as a store of value in times of uncertainty.
SLC Agricola, Farmland Partners and FirstFarms have substantial land portfolios (relative to size).
Covid-19 doesn’t look like it is going to release its grip on markets for now.
Will the land theme become more apparent in supporting shares of such companies as the coronavirus storm continues?
Agrimoney is taking January 20, when Chinese authorities announced that Covid-19 was captable of human-to-human transmission, as the day the disease first made any notable mark on markets.
So the site is taking January 19 (actually a Sunday) as the last day of Covid-free pricing.
The table below is based on closing share prices. Month-on-month changes are compared with close on February 19.
|Contract||Country of listing||Sector||Change over the past month
||Change since January 19
|Sime Darby Plantation||Malaysia||Palm oil||-16.2%||-20.0%|
|11||Andersons||US||Ethanol, trading, rail||-17.4%||-33.2%|
|12||PGG Wrightson||NZ||Rural services||-18.1%||-19.5%|
|14||Olam International||Singapore||Trading, diversified||-21.1%||-26.8%|
|19||Wynnstay||UK||Feed, trading, retail||-26.6%||-29.4%|
|20||Wilmar International||Singapore||Palm oil, sugar||-26.8%||-30.1%|
|24||S&P 500 index||-28.8%||-27.6%|
|25||Kernel Holding||Poland||Trading, oilseeds||-29.9%||-29.8%|
|27||MSCI world index||-30.3%||-29.9%|
|28||Tyson Foods||US||Meat, foods||-30.3%||-39.7%|
|29||WH Group||Hong Kong||Pork||-30.3%||-31.7%|
|37||MP Evans||UK||Palm oil||-37.3%||-40.4%|
|38||Massimo Zanetti Beverage||Italy||Coffee||-37.6%||-38.9%|
|43||REA Holdings||UK||Palm oil||-43.1%||-51.4%|
|44||Felda Global Ventures||Malaysia||Palm oil||-43.3%||-51.7%|
|46||Origin Enterprises||Ireland||Agronomy, inputs||-47.1%||-50.0%|
|47||Marfrig Global Foods||Brazil||Meat||-48.3%||-41.2%|
|51||Ag Growth International||Canada||Equipment||-59.3%||-57.6%|