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PurposeThe purpose of this research is to develop a composite agribusiness stock index and then compare the returns and volatility to other broad‐based market indices. The paper then evaluates the diversification potential of agribusiness stocks in the context of an investment portfolio.Design/methodology/approachThis agribusiness index (AGB Index) is market‐capitalization weighted. Only firms traded on the NYSE, AMEX, or NASDAQ and meeting ERS SIC classification for industries related to agriculture are included in the index. The paper then uses standard financial metrics to measure the historical risk, return, and correlation.FindingsUntil recent years, the AGB Index has historically exhibited lower returns than the market indices. The AGB Index has also exhibited lower risk and correlation with treasury securities than broad market indices.Practical implicationsIn recent years, portfolio managers and large investors have invested considerably in asset classes like farmland for stable returns, an inflation hedge, and diversification tool. This agribusiness index may further this trend and lead to the development of an alternative Exchange Traded Fund (ETF). This product would make investment in agriculture possible for virtually all investors.Originality/valueDespite increasing popularity, very little research exists on the performance of agricultural stocks in an investment portfolio. This study develops a large‐cap agribusiness stock price index to help fill this void in the literature.