After last weeks inaugural Agriculture round up piece, I am so grateful to have received positive feedback from readers! And it is great to know that many others agree with me: agriculture and ag tech are under the radar in this market, and provide some of the best investment opportunities going forward.
In these weekly roundups, I will continue to cover agriculture company press releases and headlines, as well as pick out a few charts that catch my eye.
Before we dive in, let’s take a look at some macro headlines. And there are some major ones.
For new readers joining in on this journey, here are the macro reasons on why I am bullish agriculture. For more in depth analysis, I suggest reading my large macro piece here. Aptly named “Why I am Going Big on Agriculture”.
But to summarize:
- Jim Rogers and his coverage on Agriculture. Oh and a Billionaire that you have all probably heard about, Bill Gates, is the largest private owner of farmland in the US.
- The Weather.
- Supply Chain Issues.
- Green/Clean Energy
We are seeing a theme of supply chain issues in headlines this week.
Firstly, Bloomberg released an article titled, “US Farmers Brace for Inflation as Highs of Crop Rally Wear Off“. A lot of points in this piece from a farmer holding back on selling crops due to the lack of rain putting the fate of plants to question, as well as costs going up including seeds. Fertilizer prices are doubling, and even farm equipment makers such as Deere are under pressure due to supply chain issues and rising costs.
Bloomberg even had a larger macro piece about the world economy’s supply chain issue keeps getting worse. Shipping shortages are sparking bidding wars, and rising costs are pushing exporters to raise prices…which will be passed onto the consumer stoking inflation fears. Apparently these issues which were supposed to only be temporary, will last into next year. For those who follow my take on central banks and monetary policy… it doesn’t look like the Fed’s ‘transitory’ inflation will be so temporary.
Finally, this is the craziest news regarding supply chains in the UK. McDonalds ran out of milkshakes across the country! None of the 1,250 British locations had the bottled beverage.
Even crazier is the fact that last week, Nando’s was forced to close around 50 restaurants across Britain due to poultry shortages. KFC has also been unable to provide some menu items in the recent weeks. It sucks because come on! Who doesn’t like Nando’s? Even vegetarians love the fries with the peri peri sauce.
Above are the daily charts of some grains. Just quick observation: Major support zones on Corn, Soybean Meal, Soybeans and Soybean Oil. Oats keeps breaking out. While Canola is looking ready to go.
Above are the daily charts of meats. Lean Hogs looks interesting as a basing pattern. As a trader, I would be looking to pick up contracts frontrunning a breakout.
Here is how agricultural commodities are performing against other assets this week. Soybean Oil and Canola being the best.
Going forward, we will also look at the performance of the iShares Global Agriculture Index ETF traded in Canada with the awesome ticker ‘COW’. Cow is exposed to companies involved in the production of agricultural products, fertilizers and agricultural chemicals, farm machinery, and packaged foods and meats.
If you want to take a look at all 38 holdings, check them out here. A green week for COW, but we will await the breakout above my trendline.
In terms of tickers, I have removed Input Capital since they sold their Canola royalties (along time ago actually), and Cervus Equipment since they got bought out. I will track Deere since they are the largest farming equipment maker, and I suspect some news and volatility with the supply chain issues. Here is an updated ticker list:
Now let’s see what made headlines this week!
Nutrien is the world’s largest provider of crop inputs, services and solutions with the goal helping growers increase food production in a sustainable manner. A big player in the agriculture industry.
News this week regarding Mr. Mark Thompson, Nutrien’s Executive Vice President, Chief Strategy and Sustainability Officer, speaking at Raymond James 2021 Diversified Industrials Virtual Conference. The fireside chat and Q&A session can be seen here.
Nutrien stock broke into record highs back in June. We then printed new record highs recently at the beginning of August backed by earnings. No momentum though, and this likely has to do with overall market conditions, specifically waiting for tapering comments from Jerome Powell.
Itafos Inc. (IFOS.V)
Itafos is a phosphate and specialty fertilizer company with a bunch of strategic businesses and projects located in key fertilizer markets. We’re talking Idaho, Brazil, Guinea-Bissau, and Peru. The company released strong Q2 and H1 2021 Earnings on Wednesday August 25th 2021. Itafos raised 2021 guidance and announced the closing of debt refinancing and amendments. Here are some other key points from the report:
Q2 2021 Key Highlights
- revenues of $103.3 million
- adjusted EBITDA of $33.7 million
- net income of $9.6 million
- free cash flow of $25.4 million
H1 2021 Key Highlights
- revenues of $193.5 million
- adjusted EBITDA of $54.3 million
- net income of $11.5 million
- free cash flow of $40.1 million
Revised FY 2021 Guidance
- increased adjusted EBITDA guidance to $110-120 million
- tightened maintenance capex guidance to $22-25 million
- tightened growth capex guidance to $12-15 million
- increased free cash flow guidance to $55-65 million
For full highlights and commentary from management, check this article out here.
The stock price gapped up to open at $1.60, but then sold off during the day after the earnings report. Not the type of reaction we would want to see. But the larger uptrend is still intact. I would be watching the support area around $1.20 to hold for further follow through.
Bee Vectoring Technologies (BEE.CN)
Bee Vectoring is an ag tech company with a natural precision agriculture system that replaces chemical pesticides and wasteful plant protection product spray applications by delivering biological pesticide alternatives to crops using commercially grown bees. The technology is harmless to bees and allows minute amounts of naturally-derived pesticides to be delivered directly to the blooms, providing crop protection and improved yield results. This is a very cool innovative solution for pest and disease management and improving crop quality.
Very cool stuff, and this is why I love this space! Human ingenuity at its finest to solve real world problems.
Bee Vectoring made headlines on the 23rd by announcing it has mutually terminated the definitive agreement with Alumina Partners Ltd. that secured a commitment for up to $6 Million CAD.
“Alumina’s investment assisted BVT through the uncertainty created by the COVID-19 pandemic, and we are grateful of the Alumina’s partnership during this time,” said Ashish Malik, CEO of Bee Vectoring Technologies. “Our strong business fundamentals today, in addition to securing over $3.2 million through a private placement earlier this year further strengthened our Company’s balance sheet, and as a result, we have decided that now is an appropriate time to conclude this financial arrangement.”
The chart is where things get interesting. Meets many criteria of my market structure method. We have been in a downtrend with multiple swing lows. We have then hit a major support zone which corresponds with previous record all time lows. This is definitely a very important support zone.
You can see from my downtrend line that the trend is still favoring the downside. But we are at a reversal point. What I want to see is some basing here. A nice start would be to get a close above my Moving Averages in Red and Green. I would then like to see a candle close above my downtrend line and the resistance at $0.28. Why this zone specifically? Well if we take out $0.28, we take out the previous lower high. Which means the downtrend is officially over. This with the confluences of a support bounce, moving average shift, and downtrend line break make this a very mouth watering entry. Now it all up to management to provide a catalyst. The technicals are ready.
CO2 Gro Inc. (GROW.V)
CO2 GRO has its proprietary CO2 delivery system. Their saturated CO2 solution is misted on plants which provides growers the opportunity to increase plant yields by 30% and profits by up to 100%. Growers can maximize revenue and profits with their systems low fixed and variable costs as well as ease of system installation.
Two recent headlines regarding CO2 GRO and congress/conferences. CO2 GRO with their Mexico marketing and sales partner, Rancho Nexo, have become a member of AMPHAC ( (Asociación Mexicana de Horticultura Protegida) which is Mexico’s largest protected agriculture association and will be exhibiting at AMHPAC’s ANNUAL CONGRESS to be held in Los Cabos, Mexico September 1st to 3rd, 2021.
Furthermore, CO2 GRO has been selected to participate in a virtual trade mission to Mexico presented by the Ontario Ministry of Economic Development, Job Create and Trade in collaboration with the Toronto Regional Board of Trade. Their selection was due to its delivery solutions application being a clean technology. This clean tech mission will be held September 20th-23rd.
We looked at GROW last week, and I am afraid to say that we have broken and closed below the big support zone we wanted to hold. In fact, we closed below on Wednesday, and Thursday we attempted to reverse but instead saw more selling. With this range broken, it does look like the stock will move lower to the next support zone at $0.20 where we can assess for some basing and a possible entry.
Water Ways Technologies (WWT.V)
Water Ways technologies is an Israeli agro tech company that specializes in providing water and irrigation solutions to agricultural producers. Not only do they sell agro tech, but also irrigation turnkey projects (installing and maintaining irrigation systems), and irrigation equipment and component sales. They currently have projects in China, Mexico, Ethiopia, Georgia, Laos and Peru. Their customers span 40 countries.
News this week saw Water Ways announce its shares are being quoted for trading on the Frankfurt Stock Exchange under the symbol 977.
Ohad Haber Water Ways’ CEO and Chairman, commented: “We are very pleased to have Water Ways’ shares quoted on the Frankfurt Stock Exchange, which will provide Water Ways access to a large number of new and diverse potential investors that will help to expand our shareholder base and increase liquidity.”
This was one of our favorite momentum charts last week. And my Twitter following agreed with me! We spoke about that retest of the breakout of $0.175. Look at that retest with a close above recent highs. That’s textbook retest every trader or investor loves to see. But wait, there is more! Water Ways took out the next major resistance zone at $0.235! Same retest pattern applies: we are bullish above this level, and want to see if buyers will step in on a retest just like they did at $0.175.
Above we have $0.32. If we get a candle body close above that level, new record highs will come next.
Farmers Edge (FDGE.TO)
Farmers Edge (FDGE.TO) is an agtech company offering digital farming solutions. This company made some headlines (well at least for us who follow agriculture) when it IPO’d.
Last week we discussed the big drop on earnings. I mean the stock tanked, or was clapped, whatever you prefer to use. However, it was not too long until big money came to pick up shares on the cheap. The Warren Buffett of Canada, Prem Watsa of Fairfax, picked up shares as was discussed last week. Now it seems more big money is buying.
Independent Chair of the Board, R. McFarland, recently bought $189,000 worth of Farmers Edge paying $4.73 per share. Apparently the purchase boosted his holdings by 227%.
I have to admit, I like this as a long term hold, but right now, it is like catching a falling knife. The stock can still make some legs lower, even with big names and money stepping in. If you don’t mind holding this for the longer term, this is an excellent entry opportunity. If you would rather wait for momentum and perhaps approach this as a trade, I would wait for the break and close above the $10.00 zone. This would not only recover the earnings drop, but technically we would break over a lower high indicating the end of the downtrend. For the fundamental guys, Prem Watsa and Fairfax have done the numbers and said this stock is way underpriced.
Deveron Corp (FARM.V)
Deveron Corp. (FARM.V) is an Agtech company that uses data collection to get the best out of your soil including increasing yields and reducing costs. Initiatives include fertilizer and seed management, carbon programs, and yield estimates. Very tech heavy with the cloud, data collection and insights, and drones with their own proprietary technology.
Deveron announced the closing of the second tranche of a private placement. The Company has closed the final tranche of its $8,210,957 private placement, through the issuance of 1,229,620 units in the capital of the Company at a price of $0.65 per Unit for gross proceeds of $799,253.
“We are pleased to see significant investor demand for our financing, raising in total over $8 million,” commented David MacMillan, Deveron’s President and CEO. “We remain focused on consolidating the independent agriculture crop consultant market under Deveron’s banner. We will continue investing significantly in our digital ecosystem where our clients and partners amass significant amounts of unique data, leading to increased yields, reduced costs and improved outcomes on the farm.”
Last week I was worried the stock may break down on a technical basis. But instead, we are showing some bullish signs. We broke above a trendline and my moving averages. Even confirming a close above the moving averages. If we can get a break and close above $0.70, that would be huge as it takes out the lower high swing meaning, yup that’s right, the interim downtrend would be over. The company has the cash, now it is up to management to initiate a catalyst.
Green Rise Foods (GRF.V)
Green Rise Foods is the grower of fresh produce with 73 acres of greenhouse ranges in Kingsville, Ontario. The companies mission is to be the best in class growth oriented and well capitalized contract cultivator for greenhouse grown fresh produce in North America. Become the contract supplier of choice for the largest North American wholesalers of fruits and vegetables, and seek acquisitions with a high return on invested capital.
On Tuesday August 24th, Green Rise Foods appointed Enrico Paolone as the Chair of the Company’s Board of Directors. He is a co-founder, and has advised the board since the company’s inception in 2017.
On Monday August 23rd, Green Rise Foods announced Q2 2021 results. Here are some highlights:
- The Company generated Adjusted EBITDA of $2.8 million for the three-months ended June 30, 2021 as compared to $3.0 million for the three-months ended June 30, 2020.
- The Company realized record quarterly tomato sales of $7.0 million for the three-months ended June 30, 2021 as compared to $5.7 million for the three-months ended June 30, 2020.
- During the quarter, the Company began harvesting at its newly acquired GR2 facility, with over 3 million lbs of beef steak tomatoes shipped as at August 19, 2021.
For more details, take a look at this article.
Chart wise, Green Rise Foods is approaching a major support zone at $1.60. This mush hold for further upside movement. The stock is thinly traded and we aren’t seeing much movement. I would watch to see if we can close above my trendline with some sort of strong volume.
Affinor Growers Inc. (AFI.CN)
Affinor Growers is a company focused on developing vertical farming technologies and using that technology to grow fruits, vegetables, and cannabis in a sustainable way. The company’s first vertical commercial growing facility using its proprietary technology is scheduled for September 2021. Affinor expects to plant its first strawberries this September. The company’s 15,000 square foot greenhouse in Abbotsford BC is substantially complete. Affinor’s first strawberry crop is expected to be sold in November 2021 through a large Canadian food distributor to Lower Mainland BC grocery stores. The company is working toward Canada GAP, Food Safe and Organic Certifications with plans for ESG compliance.
Readers know I always like a good vertical farming story and stock.
Two recent headlines out this week. Firstly, Affinor has cancelled its most recent private placement for $1 million and is looking at a less dilutive financing and provided updates.
Affinor CEO, Nick Brusatore, commented: “We are in the final stages of preparation for our first commercial greenhouse production showcasing our technology. Integrating alternative energy, water conservation, soil remediation, patented vertical farming cleantech and automation has taken time. But now we are in the unique position of being able to ensure sustainability, high quality, cost efficiency, safety and the ability for rapid rollout across Canada.”
Affinor also announced an international move. It has been issued Patent No. 38806 in Colombia for growing towers for automated horticulture and agriculture. These towers can be used to sustainably grow fruits, vegetables and cannabis in greenhouse and indoor facilities.
The stock price has just been ranging between $0.025 and $0.045. We have some catalysts upcoming in Q3 which could maybe cause this one to pop. Will be watching for the breakout.
Deere & Company (DE)
I don’t think these guys need an introduction. They are the largest farming equipment maker, and we’ve all seen their commercials on tv.
A big week for Deere. Earnings out on Monday the 23rd. Deere earnings surged 107% to $5.32 as revenue swelled 29% to $11.527 billion. All categories, including agriculture, turf and construction, drove results despite a challenging supply chain, Deere said. In Q3, ag sales rose 29%, turf sales grew 32%, and construction sales increased 38%.
Deere now projects full-year income of $5.7 billion-$5.9 billion, up from $5.3 billion-$5.7 billion in May. Analysts are expecting 2021 EPS of $18.13, FactSet says. Deere expects demand for farm and construction to continue benefiting from favorable fundamentals.
I should also point out that if supply chain issues continue, it could put pressure on Deere, something management warns regarding costs.
Finally, as a way to reward shareholders, Deere hiked its quarterly dividend by 15 cents or around 17%. The company will now pay a quarterly dividend of $1.05 per share, or an annualized dividend rate to $4.20 per share. This takes the dividend yield from 0.98% to 1.12%.
The stock has been on a tear, and we are now constrained between two trend lines. We could find resistance close to this upper trend line and keep consolidating in a triangle.
$350 is a major support zone while $400 becomes the big resistance zone. With these larger cap companies, the broader market indices move can put pressure on the stock. We expect some volatility with Jerome Powell speaking, and the market on edge for tapering comments.