For the last seven years, most shares have enjoyed a bull run. With such uncertainty surrounding Brexit and US politics, highly valued equities may be overdue a correction. That said, agribusiness shares have always been considered defensive stocks, but many have not been immune to the volatile macroeconomic environment that beset the world in 2016.

Aryzta

Aryzta has become a pure food business having fully exited its investment in Origin Enterprises over the past 18 months. The business has come under increased pressure to restore investor confidence, following weak US performance, as well as the acquisition of a 49% stake in French frozen food company Picard.

While the group has returned to marginal (0.5%) growth overall, the North American business, which accounts for 48% of turnover, continued to drag performance mainly as a result of contract losses.

Volume growth is key in this capital-intensive business to aid margin expansion. The business is investing in capacity while consolidating older, less efficient sites. Now with a new chairman (Gary McGann) in place, will Aryzta do a U-turn and offload its 49% stake in Picard?

Danone

Shares in French dairy giant Danone closed out the year almost 6% down on their starting price back in January. Danone shares proved one of the more volatile stocks in 2016, with prices hitting a peak of €70 a share in September before falling to lows of €58 a share in November as investors reacted negatively to earnings results.

The big news from Danone in 2016 was the announcement of $12.5bn to acquire Whitewave Foods, a US-based manufacturer of branded health foods. While many Whitewave brands such as Alpro are well known to investors, a price tag of 25 times earnings (EBITDA) means the business did not come cheap for Danone.

Donegal Investment Group (DIG)

Shares in Donegal Investment Group, formerly Donegal Creameries, saw a 10% decline over the course of 2016. Donegal reported pre-tax losses of €545,000 for its 2016 financial year, which is mainly as a result of a €2.5m legal bill incurred by the group as part of the ongoing court case with Monaghan Mushrooms, a company it holds a 35% stake in.

While this legal dispute has taken much of the attention for the last year or so, the company’s senior management have continued to divest non-core assets from the business in 2016. In June, Donegal announced that it was placing the 2,400-acre An Grianan Estate on the market with an asking price of €17m. An Grianan in Co Donegal is one of Europe’s largest organic farms.

FBD

A 10% increase in rates wasn’t enough to return FBD to profitability in 2016. But it has stabilised as it continued its overhaul with a completely new senior management team including CEO, chief financial officer and chief commercial officer, a more streamlined Insurance and Holdings Board structure, a refocus on farmer customers and a single brand strategy. It expects to return to full-year profitability in 2017 once the full effect of increased premiums and risk selection kicks in. A return to dividends may take more time. The claims environment remains uncertain, there is significant volatility in award levels, high legal costs and continued inflationary pressure. Low investment returns are also not helping.

Fyffes

In early December, Fyffes, which farms 25,000 acres in the US and Central America, agreed to sell out to Japanese giant Sumitomo in a deal worth €751m. This saw two of the largest banana companies in Asia and Europe joining forces. Shares jumped 48% on the announcement that shareholders will receive €2.23 per share in cash.

Fyffes had been on the acquisition trail – it added two Canadian mushroom businesses for almost €140m as part of a wider strategy to diversify away from its core banana operations. Two years ago, Fyffes and Chiquita abandoned merger plans that would have created the world’s largest banana company.

Glanbia

Despite recording increased sales, profit growth and margin expansion, shares in Glanbia were down 11% in the year as a result of an industry-wide correction in nutrition and ingredient valuations. Overall, it was a relatively quiet year for Glanbia on the acquisition front, as it concentrated on bedding in recent acquisitions including ThinkThin and Isopure.

Performance nutrition continues to fuel performance as margins expanded to reach over 16%. However, growing competition in the US is resulting in falling prices. The ingredients division, which is currently being restructured bringing savings of €20m, saw a fall in profits mainly as a result of weak dairy markets. Some price recovery has taken place in the second half of the year.

Greencore

Greencore’s £600m acquisition of Peacock, a US convenience food group, looks set to transform Greencore’s market and channel position. It will quadruple the US business, making it more or less the same size as the company’s existing UK business.

This should sit well alongside its existing US food-to-go customers, such as Starbucks and 7-Eleven and will increase its exposure to leading brands such as Kraft-Heinz, Tyson, Kellogg’s and General Mills, giving it scale and growth in the grocery channel.

During the year, it also transferred all manufacturing to new facilities on Rhode Island and Seattle, helping the US business move into profit in the second half of the year.

JBS SA

2016 got off to a bad start for JBS senior executives who were accused of financial wrongdoing regarding an €18m loan by the public prosecutor in Brazil. The largest meat processor in the world reported an 88% increase in operating profits to €1.9bn. It also announced that it was planning to restructure its entire business by floating on the New York stock market and locate its headquarters in Dublin. However, this plan was blocked by the Brazilian Economic Development Bank (BNDES) in October.

John Deere

Shares in machinery giant Deere & Co, the maker of the famous green tractors, hit an all-time high earlier this month after quarterly earnings figures beat market expectations. For 2016, shares in Deere & Co finished the year 35% ahead of where they were back in January – a remarkable performance given the ongoing weakness in agricultural commodity prices.

The company has spent the last two years adjusting its business to meet slowing demand and cutting costs to maintain earnings margins. Investors anticipate that demand for agricultural machinery will pick up before 2018 as farmers replace older machines, meaning future fundamentals are positive.

Kerry Group

Over the past 12 months, shares are down 11% after hitting record highs of almost €85 in April. Kerry has been trading at relatively high values, driven mainly by a widespread interest by investors in food and ingredient stocks. Kerry is now trading at more realistic values and back in line with general stock market indices.

The fear of a hard Brexit and sterling volatility coupled with the increased possibility of a slowdown in the UK economy could leave Kerry’s consumer foods division, which accounts for about 25% of sales, particularly exposed. The UK grocery environment, characterised by deflation and huge competition, remains particularly challenged. Kerry has performed with volume growth returning along with margin expansion.

McDonald’s

The fast food giant has endured some difficult times recently as more health-conscious consumers move away from the Big Mac to gourmet offerings at upstart chains like Five Guys and ShakeShack. However, new chief executive Steve Easterbrook, who was appointed in 2015, is turning the ship around by revamping menus and reducing the number of restaurants it owns.

Sales growth has returned at McDonald’s chain of 16,000 restaurants in the US, with the company now offering an all-day breakfast option as well as more flexibility in its menu. The group’s key markets in Europe also continue to perform well.

One51

The plastics and environmental group suffered a setback when it was forced to shelve plans to go ahead with a stock market flotation after financier Dermot Desmond hoovered up 25% of the shares and opposed the proposed transfer of up to 20% of One51 to Canadian investors.

Despite this setback, profits doubled to €27m for the first six months driven by its share in North American plastics business, IPL, which now accounts for about 50% of its business. It also exited the metals recycling businesses in Ireland during the year.

Origin Enterprises

While performance was boosted from its central and eastern European businesses acquired in 2015, adverse and unseasonal weather along with weak farm sentiment had a negative impact on the group’s profitability and returns. As a result, Origin issued a profit warning in April.

Origin completed the acquisition of ReSo Seeds and R&T Liming in the UK.

Origin has gotten off to an encouraging start this crop season, with better weather conditions in the group’s key geographies which provides a solid foundation for the more important second half of its financial year, when the group typically earns over 90% of annual profits.

Tesco

Shares in UK retailer Tesco finished the year close to 40% up on where they started in January and are among the best performing stocks in 2016 as chief executive Dave Lewis continued to return the company to profitability following the £6.4bn loss reported by Tesco in 2014. Lewis sold off a number of non-core businesses including a chain of 54 café restaurants and a Tesco-owned supermarket chain in Turkey.

While the company’s share price remains well below where it was in early 2014, Tesco is in a much healthier position to compete in the extremely competitive UK grocery retail market. Tesco may even return to paying a dividend next year for the first time since October 2014.

Yara

The continued weakness in global agri-commodity prices, slowing demand in the world economy, collapsed energy prices and well-supplied fertiliser markets have all combined to reduce fertiliser prices in 2016. For companies like Norwegian fertiliser giant Yara, 2016 proved a challenging year as the company’s earnings and margins took a large hit, despite a 33% drop in energy costs due to lower oil and gas prices.

Shares in Yara declined 14% in 2016 as fertiliser sales volumes in the year dropped off due to weaker farmer demand. Added to this, fertiliser priced in dollars became more expensive in 2016 for farmers in developing countries like Brazil as the US dollar strengthened throughout the year.

However, shares in Yara have rallied in recent months as international fertiliser prices begin to firm once more due to supply cuts from China, the world’s largest Urea exporter.

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