Supply chain issues, climate change, fertilizer shortages, food inflation. What a wild few months for farming and the agriculture sector. But guess what! It’s not over! Let’s add another issue to the list shall we? Avian/Bird flu breakouts hitting hens and turkeys. For us investing in agriculture, it is good news for our investments, but it does point to higher food inflation. Personally, I am still looking forward to the Spring planting season, because that is when we will find out if the Potash/fertilizers North American shortage is true.

But let’s talk a bit more about this bird flu, which saw nearly 50 million birds die in the avian influenza in 2014 and 2015.

The American states are seeing cases of avian flu and this is impacting imports to China and South Korea. A deadly strain of Avian Influenza has been found on a commercial turkey farm in Indiana, a chicken operation in Kentucky and in a backyard flock in Virginia. Georgia is the nation’s top producer of broiler chickens. A $4 Billion industry for the state. This strain of the bird flu is highly contagious and deadly to poultry, which is Georgia’s most lucrative farming sector.

State officials are quarantining the infected operations in Kentucky and Indiana and killing and disposing of the birds to prevent spread of the disease. Agriculture officials said the flu does not present a food safety risk if chickens or eggs are handled and cooked properly.

A second case of avian influenza was reported to state officials in Dubois County, Indiana, on Tuesday. These cases are the first in Indiana since 2016, and have resulted in the depopulation of over 50,000 turkeys. And the outbreak is growing. As soon as the state received the first results Feb. 9, it issued a quarantine at the site and all those farms within a 10-kilometer radius primarily in Dubois County and a portion of northern Spencer County. All those farms within the control area will have to test their animals at least once each week to monitor for the disease. The euthanized turkeys from both farms will be disposed of onsite by composting them, a method that is approved and overseen by state and federal agencies.

Dubois County is the top turkey producing county in Indiana. And Indiana is the third-largest turkey producing state in the country, the No. 1 state in duck production and the second largest in table eggs and egg-laying chickens.

Some of you are probably wondering how we can play this. Well, supply and demand will be impacted, but initial news on companies seeing the avian flu could negatively affect the stock. Take for example Tyson Foods (TSN).

The stock broke out on earnings and printed all time record highs. The stock has now pulled back to retest the breakout zone as support. The pullback can be explained by the broader market sell off, or the fact the avian flu has been detected in Tyson Foods chickens. A flock of about 240,000 chickens owned by Tyson Foods in Kentucky tested positive for a highly lethal form of bird flu, government officials and the company said on Monday, widening an outbreak that threatens the U.S. poultry industry. Tyson Foods is working with government authorities to prevent the disease from spreading and is heightening safety measures at other local farms.

I’m not going to look at all the charts in the poultry space, but here are a few companies to keep on your radar to play the avian flu: Wendy’s (WEN), Yum! Brands (YUM), Hormel Foods (HRL), Pilgrim’s Pride Corporation (PPC), Sanderson Farms (SAFM), BRF S.A (BRFS), Industrias Bachoco (IBA), and Cresud Sociedad (CRESY).

Now let’s go over some other news and charts from the Agriculture space! Before we do, keep in mind that at time of writing, the broader stock market indices are still feeling the pressure due to geopolitical tensions. But as I look at my agriculture watchlist, especially the large caps, they are still holding green as money moves to consumer defensive stocks. People will always have to eat food.

CubicFarms (CUB.TO)

CubicFarms announced a new Nebraska based Hydro-Green Certified Dealer, Central Confinement Service (CCS) with initial sales commitments for 12 HydroGreen indoor growing systems in 2022 valued at $2.25 Million CAD. Total sales commitments to date from members of the certified dealer network includes more than 100 modules in 2022 valued at over $23 million CAD.

“Giving farmers consistent fresh feed for their herds in any weather is a weight off their shoulders, and we can appreciate how simple and efficient it is to grow indoors with the automated HydroGreen technology,” said Brian Turner, Chief Executive Officer, CCS. “We’re seeing impressive results for animal nutrition and herd health. Dairies that want to optimize their transition cows and producers selling beef will see significant benefits from using HydroGreen.”

“We’re thrilled to welcome CCS to our growing HydroGreen Certified Dealer Network,” said Dan Schmidt, President, HydroGreen. “CCS is well-known and trusted by ranchers and will help local farmers in Nebraska and the surrounding areas with support for fresh livestock feed with sales of our HydroGreen technology.”

No change to report on the technicals. We still remain above the major $1.oo support, BUT are looking more likely to confirm a reversal pattern. I am talking about the inverse head and shoulders pattern, which needs a right shoulder to develop here. The trigger for a new uptrend remains a break above my horizontal resistance at $1.25.

Verde Agritech (NPK.TO)

No news but a big winner.

I need to zoom out on a weekly chart to show you the historic price action. This was a company we liked on the technical break back in November 2021, when I discussed the upcoming Potash/Fertilizer shortage.

We have now printed all time record highs hitting highs at $6.79. What next? Potentially a pullback down to the $5.40-$5.50 zone, before buyers jump in on the retest of the breakout. We still remain bullish above the $5.00 higher low. Keep eyes on this one as we approach the Spring planting season for a move on headlines of a potential North American Potash shortage.

CO2 Gro Inc (GROW.V)

Two news pieces out from CO2 Gro this week. Firstly, an exercise of warrants by Ospraie Ag Sciences.

1,488,695 warrants at $0.15 per warrant, raising proceeds of $1,723,304. Also, 1,022,285 options that ranged from $0.135 to $0.18 per option have been exercised for additional proceeds of $161,865 for total proceeds of $1,885,619.

The 12,510,980 common shares being issued are not subject to a hold period. After the issuance, the Company will have common shares of 97,326,698 issued and outstanding with 101,952,804, fully-diluted.

John Archibald, CEO Of CO2 GRO commented “We are honored that Ospraie Ag Sciences exercised all of their 10M warrants after initially investing in CO2 GRO eighteen months ago. This is an endorsement from a Strategic Investor that our business plan is on the right track taking CO2 GRO’s sustainable technology into the global protected ag, floriculture and other plant and tree seedling marketplaces. We believe our business plan will lead to increasing sales and revenues going forward and our People, Planet and Profits focus as well as adherence to ESG principles will generate superior returns to shareholders over the long term.”

• 33% Q/Q revenue growth from Q2 2021 ($91,660) to Q3 2021 ($122,103).
• 391% Y/Y revenue growth from Q3 2020 ($24,857) to Q3 2021 ($122,103).
• Achieved ten CO2 Delivery Solutions™ Commercial Technology Purchases (sales) in 2021.
• Entered the Mexican Protected Ag Market with Rancho Nexo as a Marketing Partner.
• Entered the Spanish Protected Ag Market with Jose Andres Munoz as a Marketing Partner.
• Entered the Japanese Protected Ag Market with a Technology Trial at a vegetable greenhouse and joined the Japan Plant Factory Association.
• Entered the Malaysian Protected Ag Market with CH Green Sdn. Bhd. as a Marketing Partner.
• Largest sale in 2021 was in Q4 to El Salvador based Hidroexpo for 1 hectare out of their 36 total hectares of greenhouse peppers.

John Archibald, CEO, commented, “While COVID did and is still hampering the pace of our commercial development in some regions, we have shown continuous progress in 2021 and in the first month of 2022 with more growers around the world adopting our technology. Our 2022 revenue forecast is between $1.5M-$2.5M which we are confident of achieving through the successful completion of on-going and new Technology Trials and subsequent Commercial Technology Purchases such as with Hidroexpo in 2021, as well as accelerating our direct Commercial Technology Purchases such as the US$127,750 sale announced on January 26^th 2022.”

The technicals are a bit tricky. Recently, we called the support bottom test at $0.175. The bounce there coincided with a move above my moving average and also took out a downtrend line. Our major resistance zone came in around the $0.26 zone. We could not break above it even with strong price action.

With the warrants news and stock dilution, shares are falling. We have crossed below my moving average and the drop is understandable. The company though now has cash and management will use it to advance and provide catalysts for shareholders. Let’s watch the $0.175 support once again.

Water Ways Technologies (WWT.V)

Water Ways announced that the Uzbekistan backlog increased to $9.4 million CAD after signing a third project totaling $2.7 million CAD.

The value of the third project in the Bukhara province of Uzbekistan is CAD$2,700,000 and is planned to be completed by the third quarter of 2022. The agreement includes CAD$100,000 in service and consulting services. The project irrigates using fully automated drip irrigation technology servicing a field of 886 hectares of cotton. The project includes the construction of 6 reservoirs of water and 6 complete head controls. Each head control consists of a pumping system, filtration, pressure management units, fertigation, and a cloud based automation system which will activate and operate the entire system.

We discussed the Water Ways breakout into record highs in a previous Agriculture Roundup. I outlined the resistance at $0.43 to continue the higher low. The stock is now pulling back, but our major support comes in at $0.35. I will be watching how price reacts there. I have also drawn an uptrend line indicating the uptrend still remains. For now, this is just a pullback providing us with an opportunity for a buy. I will be watching $0.35.

Karnalyte Resources (KRN.TO)

Karnalyte Resources explores for and develops agricultural and industrial potash, nitrogen, and magnesium products in Canada. One that has the fundamental backing given the macro fundamentals of the potash/fertilizers sector. Now, we have the technicals too.

A big mover. The stock was up 12% yesterday. The stock had a weekly chart breakout above $0.30, then played out the typical breakout retest pattern. It took eight weeks, but the stock is now confirming a higher low. We are approaching a major resistance zone around $0.50-$0.55 zone. If we can confirm a weekly close today over this zone, then the stock is ready to go. We could easily be talking about the $1.00 zone.

AgriFORCE (AGRI)

AgriFORCE this week announced a definitive agreement to acquire Delphy Groep BV, a Netherlands based AgTech consultancy firm for $29 million USD.

Delphy, which optimizes production of plant-based foods and flowers, has multinational operations in Europe, Asia, Russia, Kazakhstan, and Africa, with approximately 200 employees and consultants. Delphy’s client list includes agriculture companies, governments, universities, and leading AgTech suppliers, who turn to the company to drive agricultural innovation, solutions, and operational expertise. Delphy achieved 2020 annual consulting audited revenues of more than US$26 million and EBITDA of US$3 million (IFRS-based)¹. Delphy expects to end 2021 with revenues of US$28 million.

The stock is looking interesting with a cup and handle reversal pattern. Again, the importance of a confirmed close can be seen in practice here. Even though the stock popped, we did not close above our resistance zone. We are going to try a second time perhaps. A good looking close is the trigger. The market structure looks good!