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Is now the time to buy ASX agriculture stocks?

There’s no doubt the drought in NSW and Queensland has hit ASX agriculture stocks hard.

Little to no rain in vast areas of the country has left farmers facing an ongoing crisis for their livelihoods and their profits.

We’re also seeing those harsh conditions reflected in the markets this year, with several big-name agriculture stocks under pressure in 2019.

What’s happening to ASX agriculture stocks in 2019?

There’s perhaps no greater symbol of the tough conditions facing Aussie farmers than the Graincorp Ltd (ASX: GNC) share price.

Graincorp shares have plummeted 16.61% lower since the start of January as tough conditions hurt earnings and profitability. It’s a similar story over a 5-year timeline, as Graincorp shares have gone from $8.51 in November 2014 to their current $7.53 valuation.

Even this includes a 4.5% increase in yesterday’s trade despite no announcements from the Aussie agriculture group. Trading volumes were high but not out of the ordinary which makes me think it could be short sellers cashing out on the stock.

Costa Group Holdings Ltd (ASX: CGC) slipped out of the ASX 200 earlier this year after its share price continued to slide lower.

Costa shares started the year at $6.66 but are now languishing at just $2.63 per share with a market cap of $843 million. The biggest catalyst was a market update in late May which saw the Costa share price freefall 27.6% in just one day of trade.

Costa downgraded its earnings guidance on 30 May citing difficult trading conditions for Aussie crop growers, including citrus and berries.

Should you invest in ASX agriculture stocks?

An article in the Australian Financial Review (AFR) last week touched on some of the risks and opportunities of investing in ASX agriculture stocks right now.

The ASX 200 had a tough month in October, which has seen share prices fall following a record start to the year. While Costa and Graincorp shares are depressed and could fall lower, there’s the potential for some tactical buying in November.

I’d be going back to the old ‘cash is king’ mantra and investing in companies with strong cash flow in these difficult times. I think speculating on agricultural growth right now could be a recipe for disaster as we enter 2020.

If you're after some blue-chip ASX stocks for your portfolio instead, here are a few to check out in November!

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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