3 Wheat Stocks to Buy as the Shortage Continues

Stocks to buy

Wheat stocks to buy is our topic for today. The impacts of climate change and Russia’s invasion of  Ukraine, a major wheat exporter, have caused major upheaval across commodity markets in 2022. Meanwhile, the demand for food and biofuel has surged as economies are recovering from pandemic-related disruptions.

After corn and soybeans, wheat is the third most widespread crop worldwide. Russia and Ukraine have a pivotal role in the market, as those two countries account for over one-quarter of global wheat exports.

The tightening of global supplies, soaring inflation, and rising global demand drove wheat prices to an all-time high in early March 2022. Yet wheat prices recently dropped to the same level as before Russia’s invasion of Ukraine.

At the time of writing, the price of wheat hovered around $8/bushel, up 5.6% over the previous 12 months. Although the wheat market has taken a breather recently, analysts suggest that the prices of most agricultural commodities can jump well into 2023.

Here are three of the best wheat stocks to buy as a potential shortage looms in the months ahead:

ANDE Andersons $38.90
BG Bunge $101
MGPI MGP Ingredients $115.05

Andersons (ANDE)

Source: Shutterstock

First up on today’s list of wheat stocks is Andersons (NASDAQ:ANDE). This diversified agricultural business (agribusiness) conglomerate provides goods and services for the agriculture industry. It operates in the commodity merchandising, renewables, and plant nutrient sectors.

Andersons released record second-quarter financial results on Aug. 2. Its revenue grew 38% year-over-year (YOY) to $4.45 billion, while its adjusted net income came in at $82.2 million or $2.39 per diluted share, up 93% from the same quarter a year earlier. It had $86 million of cash and equivalents at the end of Q2,   compared to $27.5 million at the end of Q2 of 2021.

The company’s pipeline includes a blend of capital projects, and its M&A transactions have been focused on the grain, fertilizer, and renewables segments. Andersons is ideally positioned to benefit from favorable developments in agriculture, such as high margins and increased demand for environmentally friendly ethanol.

ANDE stock has returned 1.4% since January, and has a dividend yield of 1.8%. The shares are changing hands at 22.4 times its forward earning. Analysts’ 12-month median price forecast for the stock  is $52.50.

Bunge (BG)

Source: JHVEPhoto/ShutterStock.com

Next up is Bunge (NYSE:BG), a global agribusiness and food company with operations along the farm-to-consumer food chain. It operates via four segments: agribusiness, refined and specialty oils, milling, and sugar and bioenergy.

It posted its Q2 financial results on July 27. Its revenue came in at $17.93 billion, up 16.5% versus the same period a year earlier. The company’s earnings per share, excluding certain items, was $2.97 per , and increased by 13.8% compared to $2.61 in Q2 of 2021.

Its cash and equivalents stood at $881 million, down from $902 million at the end of 2021. Meanwhile, its inventories jumped to $10.5 billion from $8.4 billion at the end of  2021.

On the earnings conference call, management stated that, “as commodity prices moderate, the cash invested in inventory will be released and available for deployment for debt reduction and/or other uses.” Wall Street will be paying a close attention to how Bunge utilizes its cash.

Given Bunge’s bullish  expectations, especially in the refined and specialty oils and milling segments, the company hiked its full-year adjusted EPS outlook to at least $12 per share. It also introduced a long-term earnings target of around $11 per share by the end of 2026. That target was basedon increased mid-cycle earnings as well as income from projected future investments and share repurchases through the period.

So far, in 2022, BG stock is up more than 8%. The current price level supports a dividend yield of 2.5%. The shares are trading at 8.69 times forward earnings and 0.23 times its sales. Analysts’ 12-month median price forecast for the stock stands at $125.

MGP Ingredients (MGPI)

Source: Tatjana Baibakova / Shutterstock

Today’s final wheat stock too buy is MGP Ingredients (NASDAQ:MGPI). It is a leading provider of distilled spirits, branded spirits, and food ingredient solutions.

On Aug. 4, MGPI announced its Q2 financial metrics. Its revenue increased 11% YOY to $195 million, driven mainly by the sales growth of its distilling and ingredient solutions segments.

However, its net income, excluding some items,  decreased 10% YOY. Its adjusted earnings per share (EPS) of $1.15 was down 9.5% YOY. It had cash and equivalents of $37.4 million at the end of the year.

Management reported that its expansionary projects remain on track. Meanwhile, its strong free cash flow and current balance sheet will enable MGPI to continue to invest in its growth. As a result, MGP Ingredients revised its full-year 2022 guidance upward.

MGPI has returned  35% so far in 2022. Its forward price–earnings (P/E) ratio and its price-sales (P/S) ratio stand at 23.47x and 3.30x, respectively. Analysts’ average 12-month median price forecast for MGPI stock is $120.00.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

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