Food is a commodity that is in demand every day of the year. Prices may fluctuate but people keep on eating every day.
Australia is a huge country so there's a lot of land and ocean that can be used for food production.
Here are three food businesses that could produce satisfying returns for your portfolio:
Select Harvests Limited (ASX: SHV)
Select Harvests is one of the largest nut producers in Australia. It produces vast quantities of almonds every year for retail and commercial use.
Almond prices are subject to global price changes and also currency movements. Almond price decreases were the main cause of the share price to decline by a significant margin from July 2015's high of $13.19.
The demand for almonds is increasing every year with products like almond milk rising in popularity.
Management cited a number of one-off reasons why this year's profit will be disappointing. However, these will hopefully be short-term and profit will grow substantially over the next five years.
Select Harvests is currently trading at 15x FY18's estimated earnings.
Costa Group Holdings Ltd (ASX: CGC)
Costa is a large fresh food grower. It has a variety of produce including citrus fruit, berries, tomatoes, mushrooms and avocadoes.
Cyclone Debbie wreaked havoc on some food producers in Queensland, leading to shortages and price rises. Tomato prices skyrocketed in-particular. Luckily, none of Costa's farms were affected.
This should benefit Costa because it will achieve a higher price for the same amount of food. I think Costa has long-term potential as it adds farms to its total network.
Costa is trading at 60x FY16's earnings with a grossed-up dividend yield of 3.01%.
Domino's Pizza Enterprises Ltd (ASX: DMP)
Domino's is the largest pizza business in Australia. Its shares have fallen on tough times since August 2016 but I think it will keep growing in the long-term.
Management often releases new menu items, which keeps Domino's food exciting. The business expects to grow its number of outlets, profit margin and same store sales at an impressive rate over the next five years. These initiatives could add a lot to the Domino's bottom line.
Domino's is currently trading at 30x FY18's estimated earnings with a partially franked dividend yield of 1.64%.
Foolish takeaway
I think all three of these food shares have good long-term potential. Select Harvests appears to be the best value considering where its shares could be in five year's time, although I would like to add Costa to my portfolio.
