Food producers have been under severe pressure lately with the drought and the weak economic factors at play. The failure of government also providing clear policy regarding agriculture and farming and also failure to subsidise or support farmers have all made this sector a bit of a messy one to analyse.

Currency fluctuations will also cause a lot of uncertainty in this sector because the currency influences the input costs to the sector. With the above-mentioned taken into account, the sector should be growing due to income growth and population growth. This is a sector that could benefit greatly from a stable government with clear government policy. This is a sector to keep an eye on if candidate Ramaphosa takes over as leader of the ANC.

I posted one share for analysis which is AVI. This share is in a steady upward channel and has trended steadily up notwithstanding the aforementioned head winds. This share should be considered for any long-term growth portfolio and is one of my favourites in the sector due to good management and proven track record.

Tigerbrands is another food producer that springs to mind that should be considered. It has a bit of a chequered past with the Nigerian acquisitions but that is all behind them now. This company owns quality brands in its stable.

Astral foods made a very good move higher recently and should always be considered after a drought breaks due to the fall in maize prices which causes the input cost to fall dramatically. This share is also a very good dividend payer historically.

At least one food producers company should form part of any long-term portfolio and my suggestion would be AVI or Tigerbrands.

Next time
We look at Rand Hedged stocks and how to be hedged against further downgrades.


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