The Van Trump Report

Broke Bob’s Third Ag Equity Report

Agribusiness is an industry that readers of the Van Trump Report know. Conceivably it’s one where we have a competitive edge. During the next 12 months, several large interdependent events, including the U.S. November elections, the Ukrainian war, Israeli war, oil prices, China/U.S. tensions, inflation, etc., stand to sway stock markets. The second report in this series delved into the implications of higher or lower inflation. This third report considers the U.S. presidential election on Nov. 5.

Too Close to Call – Many U.S. elections will be held on Nov. 5, but none is more carefully examined than the U.S. presidency. Online betting sites that take wagers on who will win report it’s a coin toss. On some sites, the odds favor Donald Trump by a slight margin. On others, Joe Biden is favored. In this report, your author examines the performance of 21 farm-supply companies, 30 producers, and 18 farm-commodity marketers whose stock has been publicly traded since Jan. 3, 2017, to look at how they performed during both Trump and Biden administrations. The intent is to determine if observations can be drawn and possible equity trading strategies formulated.

Trump: Ag Equity Performance from January 3, 2017 to January 3, 2021 –  The market value of the combined 69 agribusinesses surveyed for this report came to about $499 billion on Jan. 3, 2017. See chart below. By Jan. 3, 2021, their combined value had risen nearly 31% to $652 billion. These are not just U.S. companies. More than half in the survey are firms located in 16 countries other than the U.S. The fastest growing among the group, an ag-products marketer, was Irving, Texas-based Darling Ingredients (NYSE:DAR), which quintupled in value during Mr. Trump’s administration. Close behind it was an ag supplier, Maine-based IDEXX Laboratories, which provides livestock care products and Brazilian SLC Agrícola S.A., which owns more than 1.6 million acres of farmland. The largest among the 69 companies surveyed were ag-suppliers Caterpillar, John Deere and BASF of Germany.

Biden: Ag Equity Performance from January 3, 2021 to June 5, 2024 – The market values of these same 69 companies under President Joe Biden have grown by just 1% thus far during his presidency. Of the three categories of agribusinesses examined – ag suppliers, producers and ag-product marketers – ag suppliers are the most valuable and grew the fastest. They can be divided into subcategories: seed and crop protection, fertilizers, farm and ranch equipment…products and services that farmers and ranchers need. Under Mr. Trump, the ag suppliers achieved 39% growth, while thus far under Mr. Biden, they have achieved 3% growth.

The second largest category, ag marketers, processes and markets the farm and ranch products grown by producers, including grain, livestock, poultry, etc. Under Mr. Trump, the ag marketers achieved 15% growth while under Mr. Biden, they achieved 7% growth.

Sandwiched between suppliers and marketers are the producers themselves. They are the least valuable category of public companies because in the U.S., so few producers go public. Other than producers of specialty crops like avocados, citrus and eggs, U.S. farmers and ranchers do not tend to list their shares publicly. They choose to remain private family-owned businesses, and the U.S. Department of Agriculture incentivizes them to do so.

Overseas in Australia, Brazil, Ukraine, etc. it’s a different story. Shares of international producers are commonly publicly traded. Some of the larger producers in our survey included the Australian Agricultural Company, Cayman Islands Fresh Del Monte Produce, Brazilian crop producer, SLC Agrícola, as well as Mississippi-based egg producer Cal-Maine Foods and Texas-based egg producer Vital Farms. 

Observations: More important to the performance of any category of agribusiness under either president’s administration is its home country. U.S. based companies in our survey grew the most under Mr. Trump’s administration…72%, whereas their growth slowed to 15% thus far under Mr. Biden. Surprisingly, though, non-U.S. agribusinesses faired worse under Biden than Trump, losing thus far 31% of their value since Jan. 3, 2021. A stronger U.S. dollar has diminished the value of foreign corporation shares on U.S. stock exchanges.

Trading Volatility into the November 5th Election –  Your author’s perception from this survey is that equity markets have yet to fully focus on the November elections, possibly offering an opportunity for trades of the VIX index before the political conventions in July and August. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) is a real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 Index (SPX). It generates a 30-day forward projection of volatility. Volatility, or how fast prices change, is often seen as a way to gauge market sentiment, and in particular the degree of fear among market participants. I’m closely tracking the VIX these days and looking for opportunities to trade the volatility as things heat up into the election.  

A Strategy Should Trump Win – Trump’s first term benefitted U.S. corporations greatly with tax reductions and streamlined regulations. One might grow more comfortable betting on U.S. equities, particularly in industries known to be favored by Mr. Trump…agribusiness, oil and gas, and domestic manufacturing.

A Strategy Should Biden Win – Capital assets and inflation hedges have done well under Mr. Biden’s administration, including gold, cryptocurrencies, and sectors of real estate, including farmland. California-based high-tech firms and defense stocks have also performed well.

In either case, one has to take into account both presidents will be limited to just one term. Lame-duck effectiveness could plague either administration. But what do I know? 

This analysis comes to you from Special note: This is not an equity research report, only a commentary on selected market trends. Nothing herein should be considered investment advice. Your author does not necessarily represent the opinions of Kevin Van Trump, The Van Trump Report or its affiliates. With any investment decision, independent due diligence and professional advice is strongly recommended.

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