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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 projects agricultural exports of $170.5 billion for fiscal 2025 (ending Sept. 30, 2025), up $500 million from the November forecast. The uptick is primarily driven by stronger grain and feed exports, partially offset by a weaker outlook for oilseeds. Grain and feed exports are expected to be $37.7 billion, up $1.2 billion due to a $1.4-billion increase in corn exports, supported by higher volumes and prices. In contrast, oilseed and product exports are forecast to decline to $32.4 billion, which moved down by $1.1 billion from the previous estimate due to lower soybean prices amid intensified competition from South America. Meanwhile, U.S. agricultural imports for fiscal 2025 are projected at $219.5 billion, reflecting a $4-billion rise from the November outlook. This increase is primarily driven by higher import values of horticultural goods, sugar and tropical products.
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.
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.
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 #229, which places it in the bottom 7% 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 outperformed the Zacks Consumer Staples sector and underperformed the S&P 500.
The stocks in the industry have collectively gained 9.3% in a year compared with rallies of 4.9% for the sector and 11.5% for the Zacks S&P 500 composite.
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 16.71X compared with the S&P 500’s 22.33X and the sector’s 17.44X.
Over the last five years, the industry traded as high as 17.67X, as low as 10.95X and at the median of 14.41X, as the chart below shows.
4 Agriculture Operations Stocks to Keep an Eye on
Mission Produce: This Oxnard, CA-based company is engaged in sourcing, farming, packaging, marketing, and distributing 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 2025 earnings has moved up 18% in the past 30 days. The Zacks Consensus Estimate for its fiscal 2025 sales suggests growth of 8.1% from the year-ago period’s reported figure, and that for earnings implies a decline of 20.3%. The Zacks Rank #2 (Buy) company has delivered a significant earnings surprise, on average, in the trailing four quarters. The AVO stock has rallied 21.8% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Corteva: This Wilmington, DE-based pure-play agriculture company is poised to drive above-market growth through its industry-leading product pipeline, and rigorous approach to innovation and operating discipline. It is poised to accelerate its pace of innovation and existing leadership position in the high-value sector to meet the increasing market demand for naturally derived products through three new collaboration agreements. Strong price execution in seed, supply-chain flexibility and solid market demand for its balanced and differentiated new product portfolios drive CTVA’s performance.
The Zacks Consensus Estimate for Corteva’s 2025 earnings has moved up by a penny in the past seven days. The Zacks Consensus Estimate for its 2025 sales and earnings suggests growth of 2.6% and 16.7%, respectively, from the year-ago period’s reported figures. The Zacks Rank #3 (Hold) company has delivered a negative earnings surprise of 7.2%, on average, in the trailing four quarters. The CTVA stock has risen 46.7% in the past year.
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 aiding the company. Its Readiness program, positive cash flow and solid performance at the Nutrition unit have been supporting 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 ADM’s 2025 earnings has declined 0.5% in the past 30 days to $4.05 per share. The Zacks Consensus Estimate for Archer Daniels’ 2025 sales and earnings suggests declines of 0.6% and 14.6%, respectively, from the year-ago period’s reported figures. It delivered a negative earnings surprise of 5.4%, on average, in the trailing four quarters. The company has lost 10.8% in the past year.
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Alico: The Fort Myers, FL-based agribusiness and land management company is poised to benefit from the strong consumption of not-from-concentrate orange juice by retail consumers, which has been steady. This has significantly aided market pricing for Early and Mid-Season, and Valencia season fruits. 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 remain near or above the recent levels.
The Zacks Consensus Estimate for the current fiscal-year loss has been unchanged in the past 30 days. The Zacks Consensus Estimate for ALCO’s current fiscal-year sales suggests growth of 20.5% from the year-ago reported quarter. The loss estimate is pegged at $2.23, whereas the company reported a loss of $3.49 in the year-ago period. ALCO has risen 36.4% in the past year.
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This article originally published on Zacks Investment Research (zacks.com).
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