A Look At Agriculture Stocks This Halloween: Nutrien & Village Farms International

Summary

• The pandemic has inflicted many troubles on the agricultural sector in Canada.
• The Agriculture and Agri-Food Canada (AAFC) has invested an additional C$ 11.6 million to help farmers and other agricultural businesses gear up for COVID-related protocols.
• The S&P GSCI Agriculture is up 5.86 per cent this year, while the iShares Global Agriculture Index is down over five per cent year-to-date.

Fall is the season for harvest and Halloween, which is just around the corner, is known for its pumpkins and squashes. But this year, there is a lot more to haunt than just ghosts. The COVID-19 pandemic has taken a toll on the agriculture sector, with farmers bearing the brunt of supply chain interruptions and disruptions in operations. However, agricultural stocks such as Nutrien Ltd (TSX:NTR) and Village Farms International (TSX:VFF) have been trending on the Toronto Stock Exchange (TSX) for a while now.

The federal and Ontario governments signed a new deal earlier in October which saw Agriculture and Agri-Food Canada (AAFC) invest an additional C$ 11.6 million to help farmers and other agricultural businesses. The fund is meant for on-farm improvements amid the coronavirus pandemic, such as building physical barriers, upgrading the heating, ventilation, and air conditioning (HVAC) system, etc.

The Canadian government, via the AAFC, had also put into place COVID-19 support plans for farmers and other food producers, which included deferral of principal loan payments for up to a year, access to an additional credit line up, etc.

As for the stock markets, the S&P GSCI Agriculture Index is up 5.86 per cent this year and nearly five per cent quarter-to-date.

Let’s look at the stocks of Nutrien Ltd and Village Farms International to understand their performance better ahead of Halloween.

Nutrien Ltd (TSX:NTR)

Current Stock Price: C$ 53.48

Saskatoon-based fertilizer company Nutrien Ltd came into being as a result of a merger between PotashCorp and Agrium in 2018. The largest fertilizer producer by capacity in the world, Nutrien manufactures the three top crop nutrients, i.e. nitrogen, potash and phosphate, and caters to customers via both physical stores and online platforms.

NTR STOCK PERFORMANCE

Shares of Nutrien Ltd are currently ranked high among trending basic materials companies across the TSX and the TSXV. In the last one month, it has accumulated an average moving volume of 1.77 million.

Nutrien stocks took a steep tumble during the coronavirus pandemic-triggered market crash in March. But since falling to a low of C$36.3 (March 18), the stocks rebounded about 47 per cent in the following seven months.

Nutrien scrips also climbed over seven per cent in the last six months and nearly 21 per cent in three months.

YTD stock performance chart of NTR stocks (Source: EODHD/Others, Thompson Reuters)

NTR SECOND QUARTER RESULTS

Nutrien Ltd recorded net earnings of US$ 765 million in its second quarter of 2020, up 11 per cent year-over-year (YoY). The company also saw a growth of 10 per cent in its free cash flow of US$ 1.6 billion in Q2 2020.

Nutrien announced a quarterly dividend of US$ 0.45 along with its second quarter financial results, while maintaining its annualized payout at US$ 1.80 per share. Its dividend yield currently stands at 4.495 per cent, as per the data available on TMX Group.

Village Farms International Inc (TSX:VFF)

Current Stock Price: C$ 6.32

Village Farms International Inc is a vertically integrated company that describes itself as one of the longest-operating greenhouse growers in all of North America The company focuses on growing  produce and distributing them across national grocers in the United States and Canada.

It is also the only greenhouse produce company in Canada that is publicly traded.

VFF STOCK PERFORMANCE

In September, Village Farms International Inc was ranked 13^th among the 30 top performing companies listed on this year’s TSX30 list.

Shares of Village Farms International are down over 22 per cent this year. Since its March lows, however, its scrips climbed 32 per cent in the last six months and about over three per cent so far in October.

YTD stock performance chart of VFF stocks (Source: EODHD/Others/Thompson and Reuters)

VFF SECOND QUARTER RESULTS

Based in Delta, Canada, Village Farms International Inc saw an 89 per cent quarter-over-quarter (QoQ) increase in its retail branded sales volumes in its second quarter ending 30 June 2020. Its total sales in Q2 2020 stood at US$ 47.5 million, up from US$ 41.3 million in Q2 2019.

The company’s total assets stood at US$ 197 million, while its total liabilities amounted to US$ 59.2 million as of June 2020.

In its second quarter of 2020, Village Farms International got the license for cannabis cultivation sales from Health Canada. The company also started gearing up for the launch of its cannabis oil products and new product forms in line with the up and coming Cannabis 2.0 trend in the latest quarter.

Village Farms International has a price-to-book (P/B) ratio of 2.26, a price-to-cash flow (P/CF) ratio of 64.2 and a debt-to-equity (D/E) ratio of 0.28, as per the data available on the TMX Group.