Making Money on the Worst Drought In California History

Making Money on the Worst Drought In California History
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$2 Billion Dollars. It’s a large sum of money and that’s what the drought cost the state of California’s agriculture economy in 2014 according to California Department of Food and Agriculture Secretary Karen Ross. The University of California-Davis reports over 400,000 acres of California farmland will remain idle due to a lack of water and will cost farmworkers 14,500 jobs.

California Drought 2015

wall street journal

The USDA is anticipating a 5% – 7% increase in grocery costs ($500 per household on average) in the year 2015 while most other inflationary catalysts such as energy costs are expected to remain flat, reports Barron’s. With such a gloomy outlook for California’s ag business in 2015 entrepeneurs and capitalists alike will strive for alternative ways to make financial gains.

Stock Buys

Monsanto (NYSE: MON)

Monstanto Pesticide

Headquartered in the St. Louis, Missouri suburb of Creve Coeur, Monsanto (NYSE: MON) uses biotechnology to genetically alter seeds and herbicides increasing the average farmers yield-per-bushel. Investment Firm Merrill Lynch and Stifel Nicolaus give the stock a Buy rating.

Tractor Supply Store Front

Tractor Supply (NASDAQ: TSCO)

The largest farm supply retailer in the country Tractor Supply (NASDAQ: TSCO)is based in Brentwood, Tennessee as suburb of Nashville. The company supplies everything from small tractors and repair parts to chemicals related to agriculture. Investment Banks Oppenheimer and UBS both give Tractor Supply a Buy rating.

Tyson Foods (NYSE: TSN)

Tyson chicken at a feeder.

Tyson Foods (NYSE: TSN) is an international food maker and distributor specializing in chicken, pork and beef. Based in Springdale, Arkansas Tyson is the worlds second largest producer of meat. The company’s diversity, acquisitions such as Hillshire, in food along with the ability to increase wholesale prices makes it resistant to the California drought. The Street and Cleveland Research give Tyson Foods a Buy rating.

John Deere (NYSE: DE)

john deere tractor

John Deere is a Fortune 500 company headquartered in Moline, Illinois. The company was established in 1837, according to the company’s website, and is the largest manufacturer of farm machinery in the world. The company’s core business is harvesters, seeders, balers, and tractors.

In an attempt to bolster its bottom line John Deere sold the fledgling Farmers Mutual Hail Insurance Co. which it has owned for several years. Bloomberg reports, “The Deere unit was hurt in 2011 and 2012 by drought in states such as Texas, Kansas and Oklahoma, and last year by a decline in crop prices”.

Despite slow first quarter sales and the California drought which is expected to continue throughout 2015; Bloomberg and report investment heavyweights, Credit Suisse, Barclay’s and Citibank give the stock a Buy