The return of President Trump to the White House in 2025 comes with all kinds of speculation regarding his trade policies and import tariffs. The United States agriculture industry is bracing for change. Trump signed the Agriculture Improvement Act of 2018 (aka the Farm Bill) into law, but it technically expired on Sept. 30, 2024. Congress has extended the bill through crop season 2025.

While Trump looks to trim down government regulatory agencies, including the USDA and FDA, his priority is to bolster industries in the United States to reduce reliance on exports. There is a high possibility that Trump will endorse more payments to America’s farmers, which could enable more machinery upgrades and financing for purchases with falling interest rates. His "Drill, baby, drill" stance to bolster domestic oil and gas production could lead to lower fuel costs, improving margins for agriculture companies. Two agriculture-related companies could benefit from a Trump presidency trickling down to galvanize the consumer staples sector.

Corteva: Seed and Crop Protection to Bolster America’s Food Supply

As a leading provider in the agriculture industry, Corteva Inc.’s (NYSE: CTVA) products are vital to sustaining the country’s food supply. Trump’s goal to reduce regulatory burdens could enable Corteva to bring new products for crop protection chemicals and genetically modified organisms (GMOs) quicker to market. Trump also opened up new markets with trade deals like USMCA, replacing NAFTA in his first term, and could continue to pursue favorable trade agreements to help increase demand for U.S.-grown crops. Trump's extension of his 2017 tax cuts would enable Corteva and U.S. companies to thrive in a more favorable tax environment. Agricultural subsidies, tax incentives, and support for farmers would provide greater stability and investment in agriculture. Lower commodity and raw material costs are a boon for operating margins.

Corteva’s Kitchen Sink Guidance Sets the Bar Low

Corteva reported a Q3 2023 EPS loss of 49 cents, still missing analyst estimates by 19 cents. Revenues dropped 5% year-over-year (YoY) to $2.46 billion, missing the $2.7 billion consensus estimates.

Corteva lowered its full-year 2024 EPS guidance to $2.50-$2.60, down from the previous range of $2.60-$2.80 and below the $2.67 consensus estimate. Full-year 2024 revenue is now projected at $17-$17.2 billion, slightly below the $17.21 billion consensus. For 2025, Corteva expects revenue of $17.3-$17.7 billion, which still falls short of the $17.95 billion consensus. Following this update, shares dropped over 10% in the days after, hitting the daily 200-period moving average support around $55.21. 

Corteva Unveils Strategy to Deliver Shareholder Value

Shares rebounded after Corteva revealed its new strategy aimed at bolstering shareholder value. The new strategy refocuses the company on helping the world address food security, climate change, and the intensification of extreme weather and pressure from insects, weeds, and diseases. Innovation is the answer to each malady. The company unveiled six growth platforms:

• Seed and trait-out licensing enables the company to be royalty-neutral by 2028's conclusion.
• Biologicals will target $1 billion in annual revenues by the end of the decade.
• New crop protection technologies will keep pace with the growing pressures of weeds, diseases, and insects.
• Gene editing, including germplasm, will transform the way the world farms.
• Biofuels will help meet the rising fuel demand from long-haul transportation industries with lower-carbon alternatives.
• Hybrid wheat is enabled by its proprietary system to deliver yield advantages of 10% up to 20% in water-stressed environments.

Corteva will reinvest 8% of its sales into research and development, or $4 million per day, to anticipate and solve farms' most intractable challenges.

Tractor Supply Co.: The Home Depot for Farmers and Rural Lifestylists

Tractor Supply Co. (NASDAQ: TSCO) supplies materials and machinery for farmers, ranchers, gardeners, do-it-yourselfers (DIY), contractors, and rural lifestylists. It operates 2,270 stores in 49 states.

Trump’s policies to support rural America will benefit customers of Tractor Supply, which will benefit them as the dollars get passed down the line. The stores sell everything from machinery, livestock feed, clothing, power equipment, and machinery to generators, truck accessories, and pet supplies.

Big Ticket Item Spending Was Strong

Tractor Supply reported Q3 2024 EPS of $2.24, matching consensus estimates. Revenues rose 1.7% YoY to $3.47 billion, falling short of the $3.8 billion consensus estimates. Comp sales declined 0.2% YoY, reflecting continued strength in big-ticket categories partially offset by year-round discretionary categories declines. Consumable, usable, edible products were mostly negative, with positive unit growth offset by average unit price pressure. The company opened 16 new Tractor Supply stores in the quarter.

Tractor Supply Raises Estimate Guidance

The company updated its full-year 2024 guidance, raising its EPS forecast to $10.10-$10.40 from the previous range of $10.00-$10.40, compared to the $10.29 consensus estimate.

It also increased its revenue outlook to $14.85-$15.10 billion, up from $14.80-$15 billion, slightly above the $14.90 billion consensus.

Tractor Supply stock underwent a 5-for-1 stock split on Dec. 19, 2024. Shares are trading down 2.1% year-to-date (YTD) as of Jan. 3, 2025. The stock pays a 1.69% annual dividend yield.