Global food prices declined the most since 2008 as Ukraine will be restarting exports of grains and vegetable oils, somewhat relieving the supply tension. A United Nations index of world food costs plummeted almost 9% last month, the lowest since January. Moreover, with the Northern Hemisphere gearing up for harvests and concerns about a looming recession could build up further pressure on food prices.
On the other hand, according to the Bureau of Labor Statistics, nonfarm payrolls rose 528,000 for July, and the unemployment rate was back to pre-pandemic levels at 3.5%, surpassing consensus estimates. This might prompt the Fed to announce another 75 bps hike in September to curb historically high inflation.
“Similarly sized increases should be on the table until we see inflation declining in a consistent, meaningful, and lasting way,” Federal Reserve Governor Michelle Bowman said.
The Fed’s hawkish stance on inflation is expected to weigh on food prices. Given this backdrop, we think Village Farms International, Inc. (VFF), Origin Agritech Limited (SEED), and S&W Seed Company (SANW) are best avoided now, given their fundamental weakness.
Village Farms International, Inc. (VFF)
Headquartered in Delta, Canada, VFF and its subsidiaries produce, market, and distribute greenhouse-grown tomatoes, bell peppers, and cucumbers in North America. It operates through four segments- Produce; Cannabis-Canada; Cannabis-U.S.; and Energy.
VFF’s sales increased 33.9% year-over-year to $70.16 million for the first quarter ended March 31, 2022. However, its net cash provided by financing activities came in at $1.01 million, down 99.2% year-over-year. Moreover, its cash and cash equivalents came in at $41.43 million, down 69.5% year-over-year.
VFF’s EPS is expected to decrease 88.3% year-over-year to a negative $0.21 in 2022. Over the past year, the stock has lost 67.8% to close the last trading session at $3.18.
VFF’s POWR Ratings are consistent with this bleak outlook. It has an overall D grade, equating to Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, it has an F grade for Momentum and a D for Sentiment and Quality. Click here to access the VFF ratings for Growth, Value, and Stability. It is ranked #35 out of 42 stocks in the D-rated Agriculture industry.
Origin Agritech Limited (SEED)
Headquartered in Beijing, China, SEED and its subsidiaries operate agricultural biotechnology and an e-commerce platform in the People’s Republic of China. The company engages in crop seed breeding and genetic improvement activities.
SEED’s revenues came in at $7.30 million for the first half ended March 31, 2022, up 298.1% year-over-year. However, its total operating expenses came in at $2.25 million, up 17.8% year-over-year. Moreover, its cash and cash equivalents came in at $1.02 million, down 76.1% year-over-year.
Over the past year, the stock has lost 8.1% to close the last trading session at $11.15.
SEED’s poor prospects are also apparent in its POWR Ratings which give it a Sell rating. It also has a D grade for Value, Stability, and Quality. Click here to see additional SEED ratings for Growth, Momentum, and Sentiment. SEED is ranked #31 in the Agriculture industry.
S&W Seed Company (SANW)
Agricultural company SANW breeds, grows, processes, and sells alfalfa and sorghum seeds. It also offers sunflower, wheat germplasm, wheat, and pasture seeds. The company sells its seeds to distributors and dealers in 40 countries.
SANW’s revenue decreased 28.4% year-over-year to $23.19 million for the third quarter ended March 31, 2022. Its net loss increased 295.4% year-over-year to $7.30 million, while its loss per share increased 280% year-over-year to $0.19.
Analysts expect SANW’s revenue to decrease 3.3% year-over-year to $81.30 million in 2022. Its EPS is estimated to remain negative in 2022 and 2023. Over the past year, the stock has lost 70.4% to close the last trading session at $0.96.
SANW has an overall D rating, equating to Sell in our POWR Ratings system. It has an F grade for Momentum and a D for Growth and Quality.
Click here to check the ratings for Value, Stability, and Sentiment for SANW. It is ranked #27 in the same industry.
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VFF shares were trading at $3.13 per share on Monday afternoon, down $0.05 (-1.57%). Year-to-date, VFF has declined -51.25%, versus a -12.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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