Modest Impact to Agriculture Stocks Amid China Tariffs

Seth Goldstein: China proposed retaliatory tariffs on multiple U.S. goods including a 25% tariff on corn, cotton, and soybeans. This move will create near-term volatility in crop prices, especially soybeans, as China is the largest global importer of the crop.

While the tariff could have a substantial impact on U.S. farmers, we see a more modest impact to the agriculture stocks under our coverage. We expect grain merchandisers including Archer Daniels Midland and Bunge to benefit from increased near-term crop price volatility. As a result, we've raised our ADM fair value to $46 per share and our Bunge fair value to $73 per share. Bunge should benefit slightly more than ADM as the firm has a greater proportion of operations in South America. We expect Bunge's soybean processing volumes to increase over the near term and improve profitability on the trading desk for both Bunge and ADM.