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Agribusiness is the industry and field of study or value chains in agriculture and the bioeconomy. It encompasses farming and farming-related commercial activities and the steps of sending agricultural commodities to market, including production, processing, and distribution. Agribusiness companies are diversified businesses involved with all aspects of food production. Climate change and the geopolitical landscape have pressured agribusinesses to adapt successfully to significant shifts in weather patterns and conflicts.
The VanEck Agribusiness ETF (NYSEARCA:MOO) owns shares of leading companies in the sector and has been trending higher since March 2020, when the global pandemic gripped global markets, sending asset prices to multi-year lows. After reaching a record peak in April 2022, MOO has corrected lower and could offer significant value at the current share price.
The war in Ukraine has caused problems with global agribusiness
In February 2022, Russia invaded Ukraine, launching the first major war on European soil since WW II. In August 2023, the battle continued to rage, with both sides showing no signs of backing down.
Ukraine and Russia are significant agricultural commodity-producing countries, and the Black Sea Ports are the logistical hubs that export the products that feed and, increasingly, power the world. The Port of Odesa is the leading Ukrainian seaport and one of the largest ports in the Black Sea basin. The ongoing war has turned the fertile Ukrainian and Russian soil into minefields and the ports into a war zone.
The conflict has pressured other countries to increase agricultural output to compensate for European breadbasket losses.
Agribusiness feeds and increasingly powers the world
Meanwhile, the growing population and green energy initiatives for biofuel to address climate change have increased the worldwide demand for agricultural products.
Corn is the primary input in U.S. ethanol production. Soybeans are the ingredient in biodiesel refining. The growing demand from the increasing number of mouths to feed with the global population at eight billion, and the uncertainty of output from Europe’s breadbasket is causing other producing countries to increase their production.
Increasing crop production involved much more than planting more seeds in fertile soil. The demand for farm and processing equipment, labor, logistics, and all aspects of agricultural production and supply chains are growing, increasing the need for overall agribusiness. As the business grows, the profits of the leading companies are soaring.
The VanEck Agribusiness ETF is a highly liquid, diversified product that pays a dividend
The top holdings of the VanEck Agribusiness ETF product include:
Top Holding of the MOO ETF Product (Seeking Alpha)
The chart shows the agribusiness companies that include medicine for livestock, farm equipment, fertilizers, food processing and farming, shipping, and other agriculture-related businesses.
At $83.63 per share on August 15, MOO is a highly liquid exchange-traded fun, or ETF, with $1.12 billion in assets under management. MOO trades an average of nearly 66,000 shares daily and charges a 0.53% management fee. The ETF pays shareholders a $1.85 annual dividend, translating to a 2.2% yield.
A bullish trend since the March 2020 low
MOO spiked lower in March 2020 as the worldwide pandemic gripped markets across all asset classes.
Twenty-Year Chart of the MOO ETF Product (Barchart)
The twenty-year chart highlights the March 2020 $42.52 low and the rally that took MOO 156.8% higher to a record $109.19 high in April 2022 as Russia invaded Ukraine, sending agricultural commodity prices to multi-year and, in some cases, all-time highs. At the $83.63 per share level on August 15, 2023, MOO remains almost double the price at the March 2020 low.
MOO corrected from the high- A scale-down buying opportunity
After reaching the April 2022 high, MOO corrected and has been in a bearish trend over the past sixteen months.
Three-Year Chart of the MOO ETF Product (Barchart)
The three-year chart shows the pattern of lower highs and lower lows that have pushed MOO 22.2% lower since the April 2022 high.
After a more than 20% correction, MOO could be a compelling investment opportunity for the following reasons:
- As the war between Russia and Ukraine continues to grip Europe’s breadbasket, the odds of periodic agricultural commodity price spikes and increased volatility remain high.
- Worldwide producers will continue to increase agricultural crop output, processing facilities, and logistical infrastructure to reduce dependency on Ukraine and Russia. Agribusiness will remain a growing business with significant earnings potential.
- Technically, MOO’s trend since last year is bearish, but the long-term path of least resistance remains higher.
- Green energy initiatives in the U.S. and Europe make agribusiness companies, food and energy producers, and processors attractive growth businesses.
- MOO owns a portfolio of companies, reducing and diversifying the risk of owning individual companies in specific agribusiness sectors.
On August 15, MOO’s trend remained bearish since the April 2022. However, the ETF has declined to a level where it offers value. Picking bottoms can be a dangerous approach to investing or trading. However, the factors supporting agribusiness make MOO compelling. In June 2008, MOO traded to a record $66.20 high that defined the upside until 2020. The $66 level is critical technical support, with resistance at last year’s $109.19 high. At the $83.63 level, MOO at the trading below the range’s midpoint.
I am a scale-down buyer of VanEck Agribusiness ETF, leaving plenty of room to add on further declines. The demand for agribusiness goes beyond the war in Ukraine, as climate change initiatives are reason enough for the MOO ETF to move higher over the coming years.