January Idea of the Month: A New Agribusiness Leader Emerges

By Travis Johnson, Stock Gumshoe, January 15, 2010

There are many significant trends and themes that you can use to develop investing ideas, but one of them stands out above most:  The population is growing, and people have to eat.  Add on top of that the fact that more people want to eat more protein, and the demand for agricultural products should grow in the decades to come. The world has gotten through one food crisis or near-crisis in 2008, which was caused in part by biofuels and rampant fertilizer inflation and exacerbated by some climate patterns, but the broader trend of increasing grain demand should be with us for a long time, and particularly increasing grain and protein demand from Asia.

I’ve suggested stocks before that play on this agriculture theme to some degree — including a Chinese fertilizer company (Hanfeng) and a Canadian investment fund that’s building a farming operation (Sprott Resource and their One Earth Farms), but today’s stock is a much more global and direct play on slowly and steadily increasing demand for grain, malted barley and oilseeds: Viterra.

Viterra trades primarily in Toronto, with the ticker VT on the Toronto exchange, but the US and Canadian markets are in sync enough that you should also be able to get a fair price on the pink sheets at VTRAF.  And, thanks to Viterra’s recent major acquisition of ABB Grain, Viterra also trades in Australia at VTA (make sure to check the Canadian trading and the exchange rate before placing an order, Toronto trading should determine the fair price).

So that’s where Viterra trades — but who are they?

This is a company with a long history in Western Canada, it has its roots in several grain cooperatives in Alberta, Manitoba and Saskatchewan that formed to give farmers a fighting chance at a fair price from the corporate grain processors.  Those grain pools and coops slowly merged and joined over the years, seeking efficiencies and stronger pricing, until a relatively few major coops remained, most of which were still largely controlled by the voting farmers but which otherwise acted like corporations, building relationships with export partners, developing retail supply networks, etc. 

One of these was the Saskatchewan Wheat Pool, which went public in 1996 with a dual-share structure that reserved voting power for thousands of famers and quickly set about driving itself nearly into bankruptcy by overbuilding and a misguided ...

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