We recently compiled a list of the 10 Worst Farmland and Agriculture Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where Archer-Daniels-Midland Company (NYSE:ADM) stands against the other farmland and agriculture stocks.

The $5 trillion food and agriculture sector has experienced significant changes over the past six decades. Technological advances, resource allocation, and production processes drove these changes. The global agricultural output has been impacted by the Green Revolution of the 1960s as well as the advancements in modern biotechnology. According to the US Department of Agriculture (USDA), the production of the agriculture sector quadrupled between 1961 and 2020. This jump is largely due to technological advancements and increased land use. Therefore, innovations over the years have enabled the sector to meet the ever-increasing demand. However, this industry is still facing challenges. Productivity growth has stunted over the past decade, which creates concerns regarding the sector’s ability to meet the world's increasing demand.

Furthermore, the global agricultural sector has changed dramatically over the years, owing to the increasing involvement of the Global South (Africa, Asia, and Latin America) in overall production. The region contributed an astounding 73% to the global output by 2020. According to McKinsey & Company, the Global South’s contribution to overall production is expected to grow as emerging markets look to modernize their agricultural sectors. Such a change has been majorly driven by technological changes in crop science, irrigation systems, and machinery, enabling the sector to gain larger yields given the same amount of land. Moreover, easing inflation in the U.S. toward the end of 2024 resulted in reduced input costs, especially energy costs, meaning improved margins for the sector.

However, the Total Factor Productivity (TFP) - an important metric for assessing resource management efficiency in agriculture - has faced a slump in recent years. The global TFP has dropped to 0.9% in the last decade, compared to 1.6% in the early 2000s. With the global food demand expected to increase by 60% by 2050, a slowdown in productivity growth comes as a major concern. This stagnation could lead to a rise in food prices, an expansion of agricultural land, and elevated pressure on ecosystems that are already under pressure due to climate change. Around such skepticism, the Farm Products sector has experienced negative returns on a YTD and 6-month basis, while S&P reported 5.80% return on a 6-month basis.

To mitigate these concerns, the agricultural sector needs to counter the global demand with sustainability. Accordingly, McKinsey highlights the need for investment in innovative technologies like precision agriculture, artificial intelligence, and satellite-based monitoring systems. Such technologies can add to efficiency as well as a reduction in the industry's environmental footprint. For instance, farmers are now able to make informed decisions through AI-driven data analytics, leading to an improvement in yield forecasting and optimization of input usage. It is expected that investment in relevant technologies could lead to an increase of over 25% in the agricultural output over the next 10 years, according to McKinsey.

Methodology

For this article, we shortlisted a list of stocks within the agricultural inputs and farm products sectors using the Finviz screeners. We also considered our previous articles on the industry to ensure relevant inclusions in our list. Using the extensive list, we selected companies that demonstrated strong market capitalization.

Next, we looked into the number of hedge funds invested in these companies, which is considered a dependable indicator of firm performance. Moreover, we noted down the short percentage of float for all the companies, which is a testament to the negative sentiment or short interest in the stock. Finally, the shortlisted stocks were ranked in ascending order of their short percentage of float.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A wheat field at sunset, showing the company's commitment to agricultural commodities.

Archer-Daniels-Midland Company (NYSE:ADM)

Number of Hedge Funds: 38

Short % of Float: 2.75%

Archer-Daniels-Midland Company (NYSE:ADM) is one of the top companies trading in agricultural commodities. The company specializes in procuring, processing, and transporting key crops, such as soybeans, corn, and wheat. The company plays a key role in the production of food, supplying essential ingredients and feedstock worldwide. However, it has faced some challenges, impacting its agricultural operations.

ADM reported an adjusted EPS of $1.14 for Q4 ended December 31, 2024, and an EPS of $4.74 for the full year, which aligns with the forecast. The total segment operating profit for the quarter was $1.1 billion, and $4.2 billion for the full year. Interestingly, Archer-Daniels-Midland Company (NYSE:ADM) has reported a decrease of 32% in its quarterly operating profit, owing to oversupply pressures and lower margins in soybean crush. Moreover, the company’s profits saw a 40% decline for the full year, which reflects the overall market fluctuations. Despite these setbacks, the company's starches and sweeteners segments performed well, driven by improvement in plant efficiency.

Regardless, Archer-Daniels-Midland Company (NYSE:ADM) looks to continue its investments in innovation, with a particular interest in regenerative agriculture. Recently, the company was awarded the 2025 BIG Innovation Award owing to its sustainability initiatives. These initiatives look to improve soil health and reduce greenhouse gas emissions.

Additionally, the company holds an operating cash flow of $3.3 billion before working capital, which reflects on the strength of its balance sheet. The company also initiated its share repurchase program, and its quarterly dividend saw an increase, making it its 93rd year of continual payout.

While Archer-Daniels-Midland Company (NYSE:ADM) looks to position itself for long-term fortitude, it faces short-term concerns like fluctuations in commodity prices and changing biofuel policies. As such, it experiences supply-related disruptions. With this, the stock’s short-selling activity remains on the higher side, making it one of the worst farmland and agriculture stocks, as per the short selling activity.

Overall ADM ranks 10th on our list of the worst farmland and agriculture stocks to buy according to short sellers. While we acknowledge the potential of ADM as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ADM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.

  Disclosure: None. This article is originally published at  Insider Monkey.