From Barron's, July 13:
Farming Appears to be the Place to Look for Growth in the Second Half
A quartet of upgrades from different analysts at different brokers points to the farm as a place to make money in the second half of 2020.....MORE
Baird analyst Mig Dobre upgraded shares of Deere (ticker: DE) to the equivalent of Buy from Hold and raised his price target to $189 from $160 on Monday.
“The past three months have provided ample data points showing consumer behavior shift post-Covid with demand for home-related durables and small ag proving remarkably resilient,” Dobre wrote in his upgrade report. More riding lawn mowers is a good thing, but he also sees better trends in Deere’s core large agricultural-equipment business. “Burgeoning replacement demand partially offsets Covid [and] ethanol shock,” he said.
A lot of corn is used to make ethanol, a fuel additive. Because travel has been reduced by the pandemic, demand for ethanol is expected to be down about 11% in 2020 compared with 2019. That hurts corn pricing and the amount of money farmers can make.
Improvement is good for Deere. The iconic American manufacturer, of course, makes large farm implements such as tractors and combines, costing tens or even hundreds of thousands of dollars. There are other farming related stocks as well, such as makers of fertilizers, seeds and crop protection chemicals.
Bank of America analyst Steve Byrne double-upgraded three crop-input stocks, Nutrien (NTR), CF Industries (CF) and Corteva (CTVA), to the equivalent of Buy all the way from Sell.
Byrne looks outside North America and notes fertilizer demand is improving in India and Brazil and there are new concerns about a corn deficit in China. Less corn in China means more business for U.S. producers. The U.S. is a dominant producer of corn globally....
