Seeds, at the heart of global food issues, Equity Trading Strategy

During a long history of 300 years, acquisitions, restructurings or disposals, Vilmorin & Cie today claims the ranking of the world’s number one for vegetable seeds and number six for field seeds. This is how the group managed to become the world’s fourth largest seed company behind German Bayer, American Corteva and Swiss Syngeta.

In early October, the French group announced sales for 2021-2022 of 1.59 billion euros, an increase of 7.5% on current data and 6.2% on a comparable basis, a performance higher than its last forecast in a context destabilized by the Russian-Ukrainian conflict. It thus managed to exceed its growth target as revised at the end of the third quarter (ie growth of around 5% like-for-like). Net profit for the French seed producer amounted to 95.4 million euros, an increase of 2 million compared to the previous financial year. This is the highest net profit since the 2012-2013 financial year.

Robust market

Vilmorin & Cie’s strength is that they operate in a robust market, in fact the value of the world seed market has tripled in twenty years, representing 41 billion dollars, driven by several complementary growth factors, including population growth. The world population is expected to reach nearly 10 billion people by 2050, generating a need for a 60% increase in food to meet demand.

To cope with population growth, increasing demand for healthier food and the need to improve agricultural productivity, the company implements sustained and continuous investments in the Research & Development division. Knowing the effort, the seed company devotes 30% of its workforce to searching for new seeds. During the financial year 2021-2022, a budget of 275 million euros (+18 million euros) was dedicated to R&D, i.e. 16.2% of the seed turnover. This value creation has enabled 442 new varieties to emerge.

The demographic and agricultural context alone does not explain the commercial dynamics of the seed business, since inflationary pressure is a lever for growth in the short and medium term, which should therefore result in a significant revaluation of the seed price.

Despite geopolitical risks and repeated meteorological accidents that disrupt harvests and maintain price volatility, it is undeniable that demographic growth and the adaptation of agricultural varieties to environmental changes speak for Vilmorin & Cie. Cutting-edge research and broad genetics enable the seed company to adapt its offering and thus be able to compete against its global competitors.

The Vilmorin & Cie value has been developing since the sharp decline observed that began in February 2022, within a consolidation zone whose boundaries are between 38.90 and 45.50 Euro. A graphical configuration in ” triple hole ” Where ” triple bottom in Anglo-Saxon terms, combined with a decrease in volume in the third low, forms one of the primary criteria for this bullish reversal pattern that appears at the end of a downtrend. A monthly bullish flood is also noticeable, further reinforcing this possible strengthening.

We recommend waiting for the crossing of the upper border, located at 45.50 and place an order fortriggers buy at 45.60 to confirm this output, which must necessarily be accompanied by volume. We also recommend to reinforce the position in case of overflow of the major resistance and the moving average 200 more 47.90. Remember that it is very likely that a throw back on the upper limit is realized after its crossing before continuing its upward movement.

The first target for the triple bottom is at 52.10 euro, i.e. 14% increase since the crossing of the major resistance located at 45.50. The second goal is at 54.70 euros, or 19.5% upside potential from our entry point. We set our protective stop at 42 euros, below the moving average of 20 and the median trading area, either 8% maximum loss. The risk/return ratio is then 1 for 2 and 1 for 2.5 respectively.

Promotional recommendation.

Play this strategy with:

Leave a Comment