Boontje comes for his wages

Now that the world is over crypto for a while, perhaps a little more investor money can flow to literally and figuratively more productive purposes. Feeding the world better, for example.

“I played on the crypto market. I don’t understand it and I don’t understand it. I made money from it but still don’t know how’. The quote of the week was written by former Morgan Stanley CEO John Mack this week in the Financial Times business newspaper. Mack also signed up for the least recommended book of 2022: the autobiography ‘Up Close and All In’. Tip: For this ‘topography of ego-tripping’, limit yourself to the hilarious and scathing discussion of Bloomberg columnist Max Abelson.

A financial book for under the Christmas tree that we can highly recommend to better understand the twisted stock market year 2022 is ‘The Price of Time – The Real Story of Interest’ by historian and City veteran Edward Chancellor. Released by Penguin, a publisher that was ultimately not swallowed up by ‘Up Close and All In’ publisher Simon & Schuster this week due to objections from the American cartel watchdog. The fans of critical(r) Wall Street reading should be grateful to that watchdog.

‘Price of Time’ is not light reading, but does what it literally says on the cover: explain why it is important to put a price on money and therefore time. It’s not rocket science. What happens throughout history when the price of money is set too low or even zero? Surprise, surprise: from tulip bulbs to Dogecoin, speculative get-rich-quick schemes are gaining the upper hand over well-thought-out long-term investments in the allocation of capital.

A beautiful but also sad report from the prairie state of South Dakota. Where a young farmer, an immigrant from Tanzania, who now mainly rents land, hoped to start the farm of his life through the auction of a 160 hectare piece next door. Only to find that the land went under the hammer for $11,000 per acre, double its price cap.

Reason: Private equity and other major investors have discovered farmland. Not to get their hands dirty themselves, but to rent out and collect the cash flow year after year. Bill Gates, who already owns the largest farm acreage in the United States, paid another $13.5 million this summer for an additional 2,100 acres in North Dakota.

No wonder American farmers list “affordable land” as their number one concern. Across the United States, according to the latest data from the Department of Agriculture, prices for agricultural land have risen 14 percent so far in 2022, to an average of $ 5,050 per hectare.

What we are seeing now cannot really be called a ‘rally’, but a return to normalcy after seven consecutive years of misery in the agricultural market.

Christian Faitz

Kepler Cheuvreux analyst

Contrary to their guesses in crypto, the big investors do know why they invest in agriculture. At stock exchange house Kepler Cheuvreux, analyst Christian Faitz looked into agrochemicals this month. Faitz: “What we are seeing now cannot really be called a ‘rally’, but a return to normalcy after seven consecutive years of misery in the agricultural market,” writes Faitz, looking at the rebound in prices for crops such as wheat, maize and soy (see chart).

Faitz sees a structural trend. “This return to normality, we believe, will take longer than most observers seem to think, with a supply shortfall in crops unlikely to disappear amid a warming climate.” Faitz sees structurally higher incomes for farmers. So pay for work, although that ‘farmer’ is often called Bill Gates or KKR. With correspondingly higher demand for suppliers of agricultural machinery, fertilizers, agrochemicals and seeds.

That higher demand exploded every digit in Deere & Co’s results this week

, the American world market leader in agricultural equipment. The Moline, Illinois giant increased revenue and net profit by a fifth in the fiscal year to the end of October, to $52.6 and $7.1 billion, respectively. For this year, Deere expects net profit to increase at least 13 percent to $8 to $8.5 billion.

“We look ahead to a strong 2023 with positive farm fundamentals and higher investments,” said CEO John May. It is a rarity: a CEO who looks optimistically ahead to the coming year without any disclaimer.

At the beginning of 2017, an asset manager put forward Deere as the stock to capitalize on precision farming, the trend to use every available acre of farmland more efficiently and thus feed a now swollen world population of up to 8 billion souls. At the time of writing, Deere stock was trading at $110. This week? 440 dollars. Unfortunately (occasionally you can make that ‘happy’) we don’t invest in what we write about ourselves.

Those who have not yet really picked up on the structural improvement on the agricultural market are the Brussels investor. The more the industrial group Tessenderlo

indicates that 2022 will be a boom year, the more the investor shrugs. At the conglomerate, the Agro branch (fertilizers and crop protection) signed for 2021 with an operating profit before depreciation (EBITDA) of 147 million euros, representing 40 percent of the group’s profit and a profit margin of 20 percent. Not bad for a crown jewel that started in 1995 with the 21 million euros that Tessenderlo paid for the small Hickson Kerley in the American desert city of Phoenix.

Kepler Cheuvreux is counting even more of the same for 2022, thanks to the turbo on Agro: 426 million EBITDA and a net profit per share of 5.3 euros. Although dixit analyst Christian Faitz has a disclaimer of two words: Luc Tack. And so the stock may only be suitable for the niche investor.

The large investor at Tessenderlo has long since voted with their feet out of frustration about the zero participation. But that is exactly what opens up perspectives for the small investor. At the moment the merger is going through an exchange offer with Tack’s other company, Picanol. Who knows, now that Tessenderlo is virtually debt-free, in addition to investments, there will soon be room for a nice, regular dividend for long-term investors?

Tack himself doesn’t show the back of his tongue yet: ‘If you want to get rich quickly, don’t come to us. Anyone who wants to invest with a view to the distant horizon is in the right place’, it sounded earlier this month.

The llamas

A dividend is not yet an option for another typical Brussels (precision) agricultural stock that stubbornly remains under the radar: Biotalys

the Ghent specialist in crop protection that, just like the now 20 billion large townsman Argenx, owes everything to the llama.

Biotalys is quoted about a euro below the 7.5 euros at which the agrotechnical company floated on the Brussels stock exchange in July 2021. This in anticipation of early 2023. Then the American environmental agency EPA will examine the authorization file for Evoca, Biotalys’ first product with which vintners and strawberry growers can protect their plants against mildew and botrytis fungus.