Amid the chaos surrounding trade wars and conflicts, food investments remain a stable option for investors. Regardless of President Trump’s diplomatic efforts in Ukraine, people still have to eat.
However, even this dependable demand doesn’t clarify why stock prices jumped 6% the day a major agricultural company issued a profit warning. The reason lies in biofuels, a commonly used but often overlooked renewable energy source, highlighting the differing approaches of the U.S. and the U.K. towards agriculture.
You might be unfamiliar with Archer Daniels Midland (Ticker: ADM), but if you’ve eaten corn, soybeans, or wheat, you’ve likely consumed their products. This massive $28 billion business is a significant player globally, showing the kind of wisdom associated with investors like Warren Buffett.
Last January, the CFO abruptly halted operations after the company released an accounting survey responding to requests from the Securities and Exchange Commission. This unfortunate timing didn’t ease investors’ worries, leading to a 24% drop in stock value that Monday, pushing it out of my top ten holdings. But let’s remember, the nutrition division contributed just 7% of ADM’s revenue.
I initially bought shares at $42 each back in May 2016 and, regrettably, saw it drop to $53 last January. Unfortunately, uncertainty lingered, and by last November, compliance issues had led to a high-profile CEO resignation.
These setbacks seemed to impact communication within ADM, as their media team couldn’t answer straightforward questions about dividend increases despite my repeated inquiries. A tip for other shareholders struggling with communication: try reaching out to the Chairman or CEO.
I often apologize for pestering higher-ups, explaining my position as a small stakeholder. In this instance, within two hours of my outreach, ADM quickly confirmed an ongoing dividend increase for yet another year—53 years in a row. It’s worth noting, though, that past trends don’t guarantee future results, and dividends might be slashed on short notice. Still, a steady yield of 3.5% during tumultuous times offers some comfort to investors.
By the way, LSEG reports that ADM’s stock has averaged a 7.4% annual growth rate over the last five years. If that continues, shareholder income could double in a decade!
Strangely enough, stock prices soared when ADM recently warned that projected full-year revenues were likely to fall short of earlier estimates. This could be linked to President Trump’s support for increased biofuel use sourced from corn, wheat, or sugar beets.
Juan Luciano, ADM’s CEO, expressed optimism, highlighting that clear biofuel policies are fostering a positive atmosphere for agriculture.
Meanwhile, in the U.K., the country’s largest bioethanol facility in Saltend Chemicals Park, near Hull, is set to shut down. Keir Starmer criticized the trade deal between the U.S. and the U.K., allowing American farmers to export substantial amounts of ethanol duty-free. This has serious implications for the local farming community and their suppliers.
Paul Kenward, CEO of ABF Sugar, voiced concerns over the imminent closure, emphasizing his worry about critical government officials being on holiday during such a crucial time.
Politically speaking, that’s beyond my column’s purpose, but I do feel fortunate to own ADM shares for income stability, even as capital growth remains a distant ambition. Food is always relevant—especially now, as it ties into renewable energy.
Knowledge is Power in Investing
Some argue that investors should just passively invest in tracker funds, but I lean towards active investing, caring about where our money goes when selecting stocks and funds. Most companies offer information online, which I’d previously have to dig out from library resources.
Numerous business sites allow users to sign up for updates, ensuring investors receive timely news akin to major financial institutions. Brands like Deere and McDonald’s, along with funds I’m invested in, have features that keep me informed.
If you’re focused on income, websites like DividendMax can help you track your payments easily.
Industry associations and investment platforms also offer vital insights, complete with live data. AIC has recently pushed for platforms to recognize individual investor voting rights, a shift welcomed by its Chairman, Richard Stone.
The Internet has fundamentally changed the landscape of access to information, making it crucial for individual investors to stay informed. We just have to carve out time to read and understand it all.
