People need to eat, so I'm investing in food

Times

17 hours ago

Amid extreme uncertainty and anxiety about trade wars and violent conflicts, food is one of the few certainties for investors. Whatever comes of President Trump's attempt to broker peace in Ukraine, people will still need to eat.
But even such dependable demand does not explain why, when one of the world's biggest agricultural commodities groups issued a profits warning, its share price surged 6 per cent higher that day. The explanation is rooted in one of the most widely used but rarely discussed forms of renewable power, bio-fuels, and illustrates stark differences between the way that America and Britain treat farmers and other businesses.
You might never have heard of Archer Daniels Midland (stock market ticker: ADM) but you have almost certainly eaten some of the corn, soybeans and wheat this $28 billion (£21 billion) giant trades around the globe. Less happily, ADM also illustrates the wisdom of Warren Buffett's dictum: 'Try to invest in businesses which are so wonderful that an idiot can run them, because — sooner or later — one will.'
The chief finance officer was stood down suddenly in January last year after this business announced an 'investigation regarding certain accounting practices with respect to ADM's Nutrition segment … in response to a request by the Securities and Exchange Commission'.
Breaking this news just before midnight on a Sunday did nothing to calm investors' fears and the share price plunged 24 per cent on Monday. This knocked it out of my top 10 shareholdings by value but, as noted here at that time, the nutrition arm generated only 7 per cent of revenues and I suspected that the market might be over-reacting.
So, having originally paid $42 per share in May 2016, I invested another five-figure sum at $53 in January last year. Sad to say, doubts continue to cloud this business and last November it was announced that the compliance chief would follow the finance chief out of the door. Then there were calls for the chief executive to resign.
Such drama seems to have traumatised some of the staff because ADM's media team couldn't answer a simple question about how many years it has increased dividends; I know because I asked them repeatedly over several days for the purpose of this column. So here's a handy hint for any shareholder struggling to get information out of a company; email the chairman or chief executive.
I usually apologise for bothering the top dog, explain I have had no luck with their staff and ask — as a small stakeholder in the business — if they might be able to help.
Within two hours, ADM emailed from across the Atlantic and said it had increased its dividends for 53 consecutive years — although on this occasion perhaps a media email address helped the swift turnaround. It is important to be aware that the past is not necessarily a guide to the future and dividends can be cut or cancelled without notice. Even so, this long history of paying investors to be patient and the current yield of 3.5 per cent do offer reasons to be cheerful in fearful times.
Better still, LSEG — formerly London Stock Exchange Group — reports that ADM has increased its dividends by an annual average of 7.4 per cent over the last five years. If that rate of ascent could be sustained, it would double shareholders' income in less than a decade.
Most immediately, when it warned earlier this month that full-year earnings were likely to be nearer $4 per share than the $4.75 previously forecast, its price surprisingly surged higher to trade at about $59 on Friday. The explanation is that president Donald Trump, who is no fan of windmills, has backed increasing the use of biofuels — basically, alcohol brewed from corn, wheat or sugar beet — blended into petrol for the massive American motor market.
Juan Luciano, the chief executive of ADM, shared the market's enthusiasm when he said: 'Clarity in biofuels policy and legislative support for agriculture are creating a favourable environment.'
By contrast, Britain's biggest bioethanol plant, at Saltend Chemicals Park near Hull, is due to close on Monday, according to its owner Associated British Foods (ABF). It blames an agreement between Sir Keir Starmer and Trump, which allows American farmers and other companies to send us 1.4 billion litres of ethanol each year, tariff-free, under the recent US-UK trade deal.
That's bad news for 12,000 British farmers and other businesses supplying soft commodities to the East Yorkshire plant where 160 people work. Paul Kenward, the chief executive of ABF Sugar, said: 'We have written to ministers multiple times, making it clear that Monday, 18 August, is our final deadline and workers will start leaving from this date.
'What worries me most is key people in government being on holiday at the wrong time. We must not lose this sovereign refining capability because of summertime annual leave.'
Politics is beyond the remit of this column, thank God, so I will merely return to where we began with why I am glad to own ADM shares for income, even though they are unlikely to shoot the lights out with capital growth. Food will never go out of fashion; especially now it can also be used for renewable energy biofuels.
• Can you beat Trump's tariffs? Play our stock trading game
Passive aggressive types argue that investors should 'just stick it all in a tracker fund'. But I am very much in the camp of the active investor and advocate taking an interest in what happens to our money when picking funds and shares. Most unit or investment trust managers, and most companies listed on the stock market, publish information freely online that could only be found in business libraries when I began investing.
Many companies' and funds' websites also include the ability to input your email address to automatically get news updates on much the same basis as the big investment institutions.
To be specific, this feature is offered by the tractor-maker, Deere and the burger-flipper, McDonald's, my two most valuable shareholdings; as well as Ecofin Global Utilities and Infrastructure, my most valuable investment trust shareholding, among others.
Income-seekers can keep track of the date and value of our next payment via free websites including DividendMax and MarketBeat.
Trade association websites and online investment platforms also provide valuable information with live data. The Association of Investment Companies (AIC) recently campaigned successfully for platforms to provide individual investors with the right to vote.
No wonder the AIC chairman, Richard Stone, hailed 'a new era for shareholder rights'. The internet has disrupted the exclusive access that institutional investors used to enjoy with masses of information that is now freely available to individual investors. But we still need to find the time to read it.
• Full disclosure: Ian Cowie's shareholdings