The Top Canadian Wheat Stocks to Look at in November 2024
In recent years, individuals interested in investing in Canadian stocks have shown a keen interest in commodity prices. They have displayed particular focus on the prices of wheat, corn, oil, barley, oats, and the overall agribusiness.
Why? Supply chain issues during the pandemic caused significant volatility in commodity pricing, and many looked to take advantage of these swings.
Along with this, overall population growth will increase the global consumption of a commodity like wheat. Over 793 million metric tons of wheat was consumed in 2022. This is not only for human consumption either. Livestock needs wheat to survive as well.
However, dealing with the commodity industry and futures contracts can get investors into hot water. So, some look for individual ETFs or stocks to buy. Instead of wheat prices, companies were exposed to wheat prices or most any other commodities, such as some of the top Canadian iron ore stocks.
In this article, we’ll cover the top Canadian wheat stocks to buy today.
There will only be one particular option on this list which is a pure play regarding wheat. Canada’s wheat stocks will primarily be involved in manufacturing equipment like tractors and augers, the shipment of wheat, and potentially the assistance of growing it on farmland via fertilizer.
Suppose you’re looking to purchase an actual wheat production-type stock. In that case, you may consider having a peek at a US-listed farming company on the NYSE, Archer-Daniels-Midland. Although it isn’t a pure play on the wheat industry, the company is one of the largest global wheat stocks.
It is a long-term play on the agriculture business. It is also considered one of the best stocks in the industry for income, as it pays a healthy, regular dividend.
But for this article, let’s focus on the top Canadian wheat stocks.
What are the best Canadian wheat stocks to buy now?
- Teucrium Wheat ETF (WEAT)
- Ag Growth International (TSE:AFN)
- Canadian Natural Railway (TSE:CNR)
- Nutrien (TSE:NTR)
Teucrium Wheat ETF (WEAT)
You may wonder why we’re starting this article on the best wheat stocks to buy in Canada with a US-listed ETF.
And the reasoning for this is that many may be looking to gain exposure to the price of wheat itself and not necessarily a company that produces wheat or even manufacturers machinery for the industry.
The Teucrium Wheat ETF (WEAT) exposes investors to the wheat market without dealing with futures contracts that can seem confusing.
The goal of the fund is to reflect the daily changes in the price of wheat for future delivery, as measured by the Teucrium Wheat Index. The fund seeks to achieve its investment objective by investing in Benchmark Component Futures Contracts.
It has total assets under management of around $170M, and fees are relatively high for this niche ETF at about $2.80 per $1000 invested.
This isn’t an option we’d be looking at for a long-term hold. Instead, it is more of an ETF you’d trade based on your feelings about forward-looking wheat prices.
If you’re looking for exposure to other crop-based ETFs, Teucrium has many other options, including ETFs that track the price of soybeans, corn, and sugar cane.
Ag Growth International (TSE:AFN)
Ag Growth International (TSE:AFN) doesn’t necessarily produce wheat or fluctuates based on the price of wheat. However, it manufactures and sells grain handling, storage, and conditioning equipment.
Consider augers, conveyors, storage bins, aeration equipment, and drying systems. This company provides the necessary tools and storage to get grains to market.
It has manufacturing facilities in Canada, the United States, Italy, Brazil, France, the United Kingdom, and India. Its geographical segments are Canada, the United States, and the International.
The company has gone through a recent rough patch, with a dividend cut in 2020 and some stalling earnings. The last few years have been better, however, with earnings rebounding nicely. Analysts expect revenue to increase by mid-single digits over the next couple of years, with earnings increasing at a little faster pace.
As a manufacturer, the company is exposed to various input costs. If you want direct exposure to wheat, you’ll likely want to have a look at the wheat ETF above. But suppose you want a company that is set to benefit from the rising demand for agricultural products. In that case, Ag Growth is certainly an option.
Canadian Natural Railway (TSE:CNR)
CN Rail (TSE:CNR) is far from a pure-play wheat producer. However, considering grains and fertilizers make up more than 15% of its shipping capacity, it will indirectly expose you to the industry.
Canadian National’s railway spans Canada from coast to coast and extends through Chicago to the Gulf of Mexico.
In 2023, CN generated roughly $16.8B in total revenue by hauling intermodal containers (24% of consolidated revenue), grain and fertilizers (20%), and petroleum and chemicals (20%), metals and minerals (13%),
forest products (12%), coal (6%), and automotive shipments (6%). Other items constitute the remaining revenue.
CN plays an important role in Canada’s wheat exports, transporting grain grown in western Canada to Great Lake and west coast ports, where it is then shipped around the world.
Despite the economic downturn in 2023, Canadian National Railway continues to post exceptional results. The company has topped estimates consistently for years and is expected to post mid-single-digit revenue and earnings growth into 2025.
A company with an economic moat of this size is undoubtedly one that long-term investors will want to look at today for its wheat exposure and general earnings power.
Nutrien (TSE:NTR)
Nutrien (TSE:NTR) is one of the largest potash producers in the world. The company is a leader in installed capacity, with roughly a 20% share.
But in the case of wheat exposure, Nutrien is the largest agricultural retailer in both Canada and the United States. It directly sells fertilizers, chemicals, seeds, and other services to farmers. It also has retail operations around the world, including expanding into Australia and South America.
And as you probably know, we need fertilizer, chemicals, and seeds to grow things like wheat, corn, canola, etc.
The company has witnessed a cooling in price due to falling potash prices. Still, I would not let that deter you from investigating if Nutrien is suitable for your portfolio today. The company is among the blue-chip dividend-paying stocks.
Although it is exposed to the cyclical nature of commodity prices, it has proven to be a reliable earnings grower both in its Nutrien days and before 2018 in its days as PotashCorp and Agrium. Nutrien is also a consistent repurchase of its own shares and pays a robust dividend.
Earnings and revenue are expected to decline a bit in 2024 as potash prices continue to face pressure. So, expect the stock price to be volatile. However, considering the company is only trading at 10 times expected earnings at the time of writing, it seems this bearish outlook is more than priced in.
Overall, there is little direct wheat exposure here in Canada, but plenty of ways to gain exposure to the industry
Whether it is agricultural machinery, shipping and storage, or assistance in production via fertilizers and chemicals, this article has plenty of ways to gain exposure to wheat.
For traders looking to capitalize on short-term fluctuations in the price of wheat, you’ll likely find the wheat ETF useful. With the current Russia-Ukraine conflict, there is a chance that wheat could remain especially volatile based on news.
But for those who pay attention to the industry, whether it be the 2023-2024 harvest, Canadian Grain Commission data, or potential weaker-than-expected exports, these manufacturers, shippers, and fertilizers are unlikely to move as fast as a futures-based ETF like Teucrium.
If you’re looking for more exposure to the top agriculture stocks, feel free to read this article here.