Inflationary pressure on food prices has been incentivizing agricultural companies to scale their production. Rising demand for food commodities from China, primarily, is expected to drive food prices even higher. To meet this demand will require an increase in supply. And as the demand for agricultural equipment to boost food production rises, we think the stocks of Deere & Company (NYSE:DE), Mosaic (MOS), and AGCO Corporation (AGCO) will benefit significantly.Food prices have been rising at an accelerated rate since the beginning of this year, due primarily to crop failures in China and a consequent increase in demand for agricultural commodities from the world’s largest consumption-driven economy. This, together with rising raw material costs and global supply chain disruptions, has resulted in a 2.4% year-over-year rise in food prices, as of April 2021, according to the Bureau of Labor Statistics.
The rising demand for agricultural commodities requires an equivalent rise in supply to stabilize prices. Rising prices will no doubt incentivize agricultural companies to produce more. Consequently, the global agricultural equipment market is expected to grow at a 5.6% CAGR over the next three years to hit $265.90 billion by 2025.
Given this backdrop, we think the of stocks agricultural equipment and supply companies Deere & Company (DE), The Mosaic Company (NYSE:MOS), and AGCO Corporation (AGCO) should continue advancing in the coming months.