When we hear about investing in commodities, most investors think about oil or natural gas. But did you know that you can trade stocks of food-based commodities like wheat?
Along with Russia and the United States, Canada is one of the world’s largest wheat exporters. Billions of people around the globe rely on wheat as a staple of their daily diet.
This article will discuss 5 of the best Canadian wheat stocks to watch in May 2024.
Top Canadian Wheat Stocks
1. Nutrien Ltd
Nutrien Ltd (TSE: NTR) is the largest Canadian producer of fertilizers for agricultural crops. Although it doesn’t directly produce wheat, its nitrogen fertilizers play a vital role in wheat cultivation.
The Saskatchewan-based company is also the world’s largest potash producer, making it an invaluable part of the world’s food chain. Nutrien exports its potash and fertilizers to more than 40 countries worldwide.
As for the stock, NTR is a component of the S&P/TSX 60 and is dual-listed on the TSX and NYSE. Nutrien is a blue-chip Canadian wheat stock that pays a solid 3.16% dividend yield to shareholders each quarter.
2. Canadian Pacific Kansas City Limited
Formerly known as just Canadian Pacific (TSE: CP), CP Rail is one of the two major railway companies in Canada. This business has been in operation since 1881 and only recently changed its name after the acquisition of Kansas City Southern for $31 billion which was finalized in April 2023.
This railway has an extensive history of delivering wheat across North America. The DTP or Dedicated Train Program is a system that allows Canadian wheat companies to control the trains they use for delivery for up to one year.
CP is a steady performer and pays out a quarterly dividend yield of 0.70%. Despite this, capital appreciation has been solid for this company as its stock has gained more than 107% over the past five years.
3. Canadian National Railway Company
The Canadian National Railway Company (TSE: CNR) is Canada’s largest railway, with over 20,000 kilometres of railroads across North America. It was founded in 1919 as a group of failed railways that were owned by the Canadian government.
As with CPKC, CNR is heavily relied upon to deliver wheat to a long list of markets around North America. In 2022, CNR brought in more than $17 billion in revenue with a near 60.0% operating ratio.
CNR pays out a modest dividend yield to investors at 2.01%. But the stock has also provided 35% growth over the past five years and is one of just a handful of Canadian companies with a market cap of over $100 billion.
4. Deere & Company
This agricultural giant needs no introduction as Deere & Company (NYSE: DE) is one of America’s largest farm equipment manufacturers. It produces some of the world’s best wheat harvesting equipment, including augers, drapers, and combines.
Most people will know Deere & Company from its John Deere line of agricultural and lawn care products. From lawnmowers to tractors, the classic green and yellow branding is well-known around the world.
Deere & Company is an American blue-chip stock that trades on the NYSE and is a component of the S&P 500 index. It pays out a 1.15% dividend yield and, as of August 2023, has a market capitalization of $128 billion.
5. Adecoagro S.A.
Adeocoagro S.A (NYSE: AGRO) is an agricultural company that operates primarily in South America. It produces several commodities: wheat, soybeans, ethanol, sugar cane, and rice.
As of 2023, Adeocoagro had over 234,000 hectares of crops planted, providing an output of over 730,000 tonnes produced annually. This stock pays shareholders a 3.16% dividend yield and has provided a 15.23% total return over the past five years.
What are Wheat Stocks?
Wheat stocks are companies that are involved in either the production or distribution of wheat and other grains. As it is one of the most important food sources in the world, there are plenty of companies that are involved in processing and delivering wheat to all corners of the globe.
As you can see from our list of the best Canadian wheat stocks, these companies can be from industries like railways, fertilizers, or agricultural and cultivating tools and equipment. Wheat stocks are typically considered to be value stocks and often pay out a quarterly dividend.
How To Invest in Wheat Stocks in Canada in 2024
Canadian wheat stocks can be purchased from any brokerage in Canada. If you want to save on fees and enjoy a simple online trading process, you should consider a discount brokerage like Qtrade or Questrade.
Questrade
Trade stocks, ETFs, options, FX, bonds, CFDs, mutual funds, etc.
Get $50 trade credit with $1,000 funding
Low and competitive trading fees
No quarterly inactivity fees
Access to advanced tools and trading data
Top platform for advanced traders
Transfer fees waived
Qtrade
Up to $150 sign-up bonus
Trade stocks, ETFs, options, bonds, etc.
Excellent platform for newbies and seasoned investors
Competitive trading fees
Excellent customer service
How to Choose Wheat Stocks for Your Portfolio?
When it comes to choosing wheat stocks, look for established companies with strong cash flow and revenue growth. Companies with diversified partners on a global scale have a better chance of producing this growth.
Since most wheat stocks will pay out a dividend, it can be an added bonus for just owning the stock. Rather than seeking a higher yield, check the stock’s dividend growth history to ensure your distributions will continue to rise.
Downsides of Wheat Stocks
Like with any commodity, wheat companies are heavily impacted by the price of the commodity’s futures contracts. A drop in the value of wheat can have a heavy impact on a company’s margins.
Most wheat stocks are value stocks, so you won’t see the same high growth trajectory as tech stocks. This is often combatted by paying out a dividend to shareholders.
There are not as many pure-play wheat companies. Many wheat stocks are simply involved in one part of the production and distribution process.
Top Grain Stocks in Canada
- Nutrien (TSE: NTR)
- AG Growth International (TSE: AFN)
- Verde Agritech plc (TSE: NPK)
- Ceres Global AG Group (TSE: CRP)
- Canadian National Railway Company (TSE: CNR)
- Canadian Pacific Kansas City Ltd (TSE: CP)
- Teucrium Wheat Fund (NYSEARCA: WEAT)
- Archer-Daniels Midland (NYSE: ADR)
- Deere & Company (NYSE: DE)
- Adecoagro S.A. (NYSE: AGRO)
Methodology
Everyone has a different strategy when it comes to choosing Canadian wheat stocks. It’s hard to go wrong by looking at continued revenue growth with a high rate of cash flow.
Look for stocks that are trading at cheaper multiples, like the Price-to-Sales or Price-to-Earnings ratios. A dividend is a nice bonus, but don’t chase higher yields.
FAQs
The best wheat stock to buy in Canada is Nutrien Ltd. It is one of the world’s largest fertilizer companies and is a cornerstone of the global wheat industry.
Canada is one of the world’s largest wheat producers and exporters. Alberta and Saskatchewan are the two provinces with the most wheat production in Canada.
The top 10 wheat suppliers are Russia, the United States, Canada, Ukraine, China, India, France, Germany, Pakistan, and Australia.
As of 2022, Peru is Canada’s number one customer for wheat. On average, Peru buys more than 1 million tonnes of wheat from Canada annually in a relationship that dates back over 40 years.
Related: Illiquid Investments in Canada
