This “growth without hiring” trend we’ve been talking about these past few weeks is en fuego: Microsoft (MSFT) is the latest to say it’s cutting expensive humans, announcing last week that it will lay off 9,000 people.
That comes on top of 6,000 cuts in May. Six thousand here, 9,000 there. As they say, pretty soon you’re talking about serious numbers!
The tech bros aren’t saying it out loud—though some, like Amazon.com (AMZN) CEO Andy Jassy, are (he could barely conceal his enthusiasm when discussing this seismic shift from expensive humans to cheaper machines)—but AI is clearly “at work” in Big Tech, pushing out humans by the thousands.
The trend is bleeding to other sectors, too, like small business. As I wrote last week, one small-biz owner recently told me she was “in a full-blown work relationship” with ChatGPT.
That tells us contrarians one thing: Gretzky-like, we need to skate where the puck is going. And one place it’s going—and very few people realize it yet—is to one of the oldest professions there is: farming.
Ag’s Misunderstood Tech Embrace
Down on the farm, they’re facing a much different problem than Big Tech: They’re not trying to get rid of workers—they’re struggling to attract them.
But here’s something few people realize about farming: It’s always been a hotbed of innovation. Consider that from 1948 to 2017, US farms nearly tripled their output. But at the same time, the number of hours worked plunged 80%, according to the USDA.
How did that happen? Partly, education levels shot higher. Back in 1950, around 4% of US farm work was done by workers with at least some college education. But in 2017, that number had soared to 41%.
With that came bigger farms. And these more educated workers took to new tech, driving up productivity per worker by 16X in 2017, compared to back in ’48.
So we’re left with an industry facing a labor shortage but also has a long history of adopting the latest tech. At the same time, we’ve got growing demand due to the rising population and a shift toward carnivorism—or diets that include more meat (a friend of mine lost quite a bit of weight on one of these, though he still saves room for beer—ha!).
That, in turn, will help drive demand for feed and, with it, corn (more on that shortly). And all of this is completely off the radar to most investors.
If this sounds like er, fertile soil for AI to take root—and us contrarians to dig into—it is! “Big ag” firms like Archer Daniels Midland (ADM) are solid plays here.
ADM Is Our “Go-To” for an AI-Driven Ag Boom …
Think of ADM as a kind of ETF for the ag business, with divisions that do everything from buy and sell crops to process commodities, like corn, into finished products like sweeteners, ethanol and starches. The company also handles crop logistics and makes artificial flavors, pet foods and other specialty ingredients.
ADM is already using AI to generate leads and cross sell its various products to existing customers, according to a recent interview CIO Kristy Folkwein gave to Forbes. It’s also using the tech to create new artificial flavors; doing so lets the company make these flavors faster and cheaper than before.
AI could also be a boon to ADM’s commodity-trading business, giving it a better handle on future weather patterns and crop yields, for example. Beyond that, it could help shave costs from the company’s supply chain and logistics networks.
And, Microsoft-like, there’s just a bit of a hint that AI could play a part in ADM’s ongoing cost-cutting plan, which includes up to 700 layoffs and the closure of its commodity-trading business in Shanghai. It’s hard to imagine that automation won’t take up at least some of the slack here.
… And a Spike in Corn Prices, Too
So yes, ADM is a savvy play as AI “replants” agriculture. But as you can probably tell, we’re still in early days here. Which is fine—we’re happy to let AI grind away while we cash in on another, far more immediate, growth driver: a bounce in corn prices.
And make no mistake: Corn prices hold a lot of sway over ADM stock, since the company is a major player in commodity trading. Take a look at how the stock (in orange below) has tracked corn (in purple) over the last five years:
Corn Prices Drive ADM
Clearly, when corn rises, investors flock to ADM. And when it falls, they run.
I know I don’t have to tell you that the cure for low prices is low prices—farmers have already cut back on former corn acreage to devote the space to more profitable crops. That’s going to put a crimp on supply.
Meanwhile, we have many mouths to feed in the world. Eight-point-two billion of them, to be specific. A significant amount of them consume corn daily. Many people eat it directly as a vegetable. More consume it indirectly via processed foods, where corn syrup is a primary ingredient.
Corn is also a main ingredient in animal feed. Cattle, pigs and poultry all eat corn because it is cheap and widely available, and it fattens up the end product—meat! In all, it takes about six pounds of corn to produce a pound of beef.
Demand for meat is rising. As poor countries become wealthy, people eat more chicken, beef and pork. Consumption is directly correlated with income. And then, of course, we have the aforementioned meat-based diets taking off in wealthier countries.
All of that adds up to rising demand.
And look at the right side of that chart above—corn clearly looks like it’s testing a bottom here, touching lows not seen since last August. This at a time when just about every other commodity—oil, gold, even ethanol (another catalyst for ADM)—has been spiking.
The bottom line here is that corn is overdue for a bounce. When it comes, it’ll likely take ADM with it. The company’s increasing use of AI and other new tech will add to its profits. Let’s buy now—and start enjoying ADM’s 3.7% dividend (with upside) before that happens.
5 “Contrarians-Only” Dividends Set for 15% Yearly Gains (Forever)
Contrarian moves like this—buying into an overlooked sector like farming, where AI will have a massive impact—are the key to building lasting wealth.
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