Back to: Jss3 Agricultural Science (PVS)
Topic: Agriculture in Stock Exchange
WEEK: 7 & 8
Agriculture in Stock Exchange refers to the buying and selling of agricultural commodities, such as grains, oilseeds, and livestock, on the stock exchange. This allows farmers, traders, and investors to participate in the market and manage the risks associated with agriculture.
The concept of agriculture in the stock exchange is not new. In fact, agricultural commodities have been traded on exchanges for centuries. However, the process has become more streamlined and accessible in recent years, with the advent of electronic trading platforms.
The benefits of agriculture in the stock exchange include increased liquidity, price discovery, and transparency. By trading on a public exchange, buyers and sellers can access a larger pool of potential trading partners, which can result in more favourable prices. Additionally, the exchange provides a central location for price discovery, which helps to establish a fair market value for commodities.
Despite these benefits, there are also risks associated with agriculture in the stock exchange. Commodities prices can be volatile, and weather patterns and other factors outside of traders’ control can impact supply and demand. Additionally, the process of trading on an exchange can be complex and may require specialized knowledge.
MEANING OF STOCK EXCHANGE
A stock exchange is an organization that provides a marketplace where individuals can buy and sell shares of various companies. This allows investors to invest in multiple companies and diversify their portfolios. The process involves the buying and selling of securities, such as stocks and bonds, which are traded on the exchange.
Some commonly used terms in the stock exchange include shares, stock, shareholders, and stockbrokers. Shares are indivisible units of capital that represent ownership in a company. Stock refers to the capital raised by a corporation or organization through the sale of parts or all of the enterprise to multiple part-owners. Shareholders are individuals or entities that legally own one or more shares of a joint stock company. Stockbrokers have licensed representatives who buy and sell company shares on behalf of individual shareholders.
Privilege to Rights of Stockholders
- Shareholders have the right to vote in the election of the board of directors, which is a crucial decision-making body in a company. This means they have a say in who governs the company, its direction, and its policies.
- Shareholders are entitled to a share in the profits of the company. This means that when the company generates profits, it may distribute some of it to its shareholders in the form of dividends. The amount of dividend paid to each shareholder is proportional to the number of shares they hold.
- Shareholders have the option to purchase new shares of the company when they become available. This means that they have a right of first refusal on new share offerings. By purchasing new shares, they can increase their stake in the company and potentially benefit from any future growth or profitability.
- Shareholders have the right to purchase the company’s assets if it becomes financially unviable. This means that if the company becomes insolvent or bankrupt, shareholders may have the opportunity to purchase the company’s assets at a discounted price. This can be a way to recoup some of their investment in the company.
Examples of Agric Business Enterprises, whose shares are traded on the Nigeria Stock Exchange NSE are;
- Livestock Feeds Plc: Livestock Feeds Plc is a Nigerian-based company that specializes in the production and distribution of animal feeds. The company produces a range of animal feeds for different types of livestock, including poultry, fish, and cattle. Livestock Feeds Plc operates a modern feed mill in Nigeria with a production capacity of over 20,000 metric tonnes per annum.
- Nigerian Breweries Plc: Nigerian Breweries Plc is a Nigerian-based company that is engaged in the brewing, marketing, and distribution of beer and non-alcoholic beverages in Nigeria. The company produces a wide range of beer brands, including Star, Heineken, and Gulder. Nigerian Breweries Plc operates several breweries and bottling plants across Nigeria.
- Nestle Nigeria Plc: Nestle Nigeria Plc is a subsidiary of Nestle S.A., a Swiss multinational food and beverage company. Nestle Nigeria Plc is engaged in the production, marketing, and distribution of food and beverage products in Nigeria. The company produces a range of products, including Maggi seasoning, Milo, and Nescafe coffee.
- Nigerian Bottling Co. Plc: Nigerian Bottling Co. Plc is a Nigerian-based company that is engaged in the bottling and distribution of soft drinks in Nigeria. The company is a franchise bottler for Coca-Cola in Nigeria and produces a range of Coca-Cola products, including Coke, Fanta, Sprite, and Schweppes.
- Cadbury Nigeria Plc: Cadbury Nigeria Plc is a Nigerian-based company that is engaged in the production, marketing, and distribution of confectionery products, food drinks, and gum in Nigeria. The company produces a range of products, including Bournvita, TomTom, and Buttermint.
- Unilever Nigeria Plc: Unilever Nigeria Plc is a Nigerian-based company that is engaged in the production, marketing, and distribution of consumer goods in Nigeria. The company produces a range of products, including Lipton tea, Close-Up toothpaste, and Lux soap.
- Flour Mills of Nigeria Plc: Flour Mills of Nigeria Plc is a Nigerian-based company that is engaged in the production and distribution of food products in Nigeria. The company produces a range of food products, including flour, pasta, and noodles. Flour Mills of Nigeria Plc also has interests in sugar refining and edible oil processing.
- Dunlop Nigeria Plc: Dunlop Nigeria Plc is a Nigerian-based company that is engaged in the production and distribution of tyres and tubes in Nigeria. The company produces a range of tyre products for different types of vehicles, including cars, trucks, and motorcycles.
- Ecobank Nigeria Plc: Ecobank Nigeria Plc is a Nigerian-based subsidiary of Ecobank Transnational Incorporated, a pan-African banking conglomerate. Ecobank Nigeria Plc is engaged in the provision of commercial banking services in Nigeria. The bank offers a range of banking products and services, including personal banking, corporate banking, and investment banking.
Importance of Stock Exchange in Agriculture
- Agricultural enterprises have the option of raising money by offering shares for sale to the general public on the stock exchange. This can be a beneficial way for agricultural businesses to raise capital as it allows them to access a large pool of potential investors.
- Farmers who invest their money by purchasing shares in agricultural businesses have the potential to benefit from the redistribution of wealth. If the businesses in which they invest declare a profit, investors may receive a share of that profit through their stock prices and dividends.
- Agricultural enterprises that operate under the stock exchange tend to have more improved management standards and efficiency records than privately owned enterprises. This is because they are subject to regulatory oversight and are required to meet certain standards of transparency and accountability.
- Investing in shares creates investment opportunities for small investors as well as large-scale farmers. Individuals can buy the number of shares that they can afford, meaning that both small holder farmers and commercial farmers can invest in the same enterprise and enjoy the same privileges and rate of return.
- The movement of share prices can serve as an indicator of the state of a national economy. If companies and the economy show signs of stability and growth, share prices tend to rise or remain stable. Conversely, a depressed economy with a financial crisis may lead to a crash in the stock market. Therefore, monitoring share prices can help investors and other stakeholders better understand the state of the economy.