It was a bad week for the overall stock markets. As I am writing this agriculture post, my CNBC breaking news notification went from, “S&P 500 and other markets go green reclaiming losses for the day” to “S&P 500 falls again on Thursday, inching closer to bear market territory”. It has been one of those weeks.
If you are a regular reader of my Market Moment work on Equity Guru, then you know I am still bearish on equities from a technical perspective. Major resistance zones need to be reclaimed for me to go bullish. One can say there is also a strong fundamental reason to remain bearish the markets. And that reason is the Federal Reserve and other central banks will continue to raise rates even if it brings down stocks. As Fed Esther George said this week, the Fed isn’t focused on the impact of raising interest rates on stocks because the Fed is focused on taming inflation.
Or putting it quite simply, the Fed will allow assets to fall and will not keep them propped with cheap money. Some analysts and traders don’t buy this. Perhaps a drop in real estate might get the Fed and other central banks concerned, but we shall see.
The focus now is to look for sectors that will be making headlines in the future. Incredible opportunities exist right now as stocks from good sectors are on sale. Agriculture remains my top pick. Rising food prices, potash and fertilizer issues, supply chain issues, and unpredictable weather patterns will continue to make headlines and impact food. Over in the UK, we are sadly seeing the impact of rising food prices and inflation overall.
A quarter of Britons have resorted to skipping meals as inflationary pressures and a food crisis conflate in what Bank of England Governor Andrew Bailey recently dubbed an “apocalyptic” outlook for consumers.
In last weeks roundup, I went over some agriculture commodity set ups. Wheat was the big breakout move, and remains so.
For those looking to play the breakout, look no further than the Teucrium Wheat Fund:
The ticker is WEAT, and we got the same breakout above $11 just as we have seen on the futures.
In terms of the weekly performance, it wasn’t the worst week for agriculture. Most agricultural commodities are green for the week with soybean meal leading the way.
When I look at my agriculture watchlist, I am greeted with a lot of red. Some stocks are breaking below support, some stocks have a large red candle taking them to support. In the following days and weeks, we will have to assess if these support levels hold.
It was tough looking for five top agriculture gainers in this market, but I have found three stocks that have had a good week with all things considered. Some really nice looking technical patterns too!
AgriFORCE Growing Systems (AGRI)
Market Cap $40.21 Million USD
Yes the stock fell 10% yesterday, but had a rise of 65% on Monday May 16th with follow through for the week. News was released on Wednesday May 18th 2022. AgriFORCE completed the previously announced acquisition of the intellectual property (IP) of Manna Nutritional.
The IP encompasses patent-pending technologies to naturally process and convert grain, pulses and root vegetables, resulting in low-starch, low-sugar, high-protein, fiber-rich baking flour products, as well as a wide range of breakfast cereals, juices, natural sweeteners and baking enhancers.
“We are excited to close on the acquisition of the MNG intellectual property, as it allows us to launch innovative consumer products that leverage our broad industry expertise and expanding multinational footprint,” said AgriFORCE CEO Ingo Mueller. “We have been working aggressively behind the scenes since first announcing the planned acquisition and look forward to launching our first product later this year. In addition to our own branded products, we are in discussions with food manufacturers to private label a variety of consumer products. We believe these products address a multi-billion dollar, underserved market in the all-natural flour, bakery and snack categories. Moreover, this acquisition is aligned with our broader strategy of leveraging our IP to meet the growing demand for healthy, delicious, and nutritious foods”.
Agriforce is planning to pilot test its first branded product in the specialty flour category under the brand un(Think) Foods with businesses and consumers later in 2022. Shares traded higher by 4.29% on the release of this news.
We were very close to our major support level at around $1.00. Buyers did step in and led to a large gap up on May.16th just a few days before the release of the news. We hit resistance at $3.00 before pulling back. What next? Well support comes in at $2.00. With this current sell off, traders should watch to see if AGRI falls to this support level which is now buoyed by the large gap up.
RiceBran Technologies (RIBT)
Market Cap $33.91 Million USD
A very popular stock among my readers and on Twitter, and featured for the first time in last week’s agriculture sector roundup. In that article, I mentioned that RIBT is showing a very promising reversal pattern. Well, things are developing really well.
News wise, RiceBran announced the initiation of a significant capacity expansion of the company’s MGI Grain Incorporated (MGI) facility in East Grand Forks, Minnesota. The expansion is expected to double the capacity of the pearling mill, enabling RiceBran to meet growing demand for North American-sourced, grain-based ingredients and with a minimal capital investment and a limited increase in labor.
The project will replace one of the mill’s main grain de-hullers with a new de-huller/pearler; more than doubling the plant’s production capacity. In addition to the new huller, MGI will support increased throughput and quality with the addition of a color sorter, as well as enhancements to the mill’s grain receiving, cleaning and conveyance systems.
“These upgrades will allow RiceBran to finally leverage MGI’s true potential expanding volume and process flexibility while enhancing product quality,” said MGI business lead Kevin Pray. “This will allow us to double the capacity of the pearling mill within the same building footprint, giving us the ability to meet increasing customer demands while navigating a tight labor market, with only a modest capital investment.”
Boom. Breakout. The resistance we were watching got taken out, and Thursday saw price action pullback to retest. As long as the stock remains above $0.63, more upside is coming. We should see buyers step in on this retest.
For all you breakout traders, what is really important is not just the size of the green candle, but also the volume on the breakout. I notified you all last week about the big volume coming into this stock. Well take a look at volume on the day of the breakout on May 18th 2022:
Over 12 million shares on the breakout. Wow. This is perhaps one of the most, if not the most, exciting looking agriculture set up on the markets. While everything is red, RiceBran Technologies had a fantastic week even confirming a major breakout.
Where next? If this support holds, we expect further upside to $0.90, and there is some interim resistance at $0.8250.
CO2 Gro Inc (GROW.V)
Market Cap $21.41 Million
Epic surge of volume in the last few hours on yesterday’s trading taking the stock up 33.33% for the day. Now, it is all about continuation.
On May 17th 2022 CO2 announced that the second phase of CO2 delivery solutions system has been installed for a grape tomato technology trial in The Cucumber Man’s Alberta greenhouse. Part two of this larger Trial is now operational on grape tomatoes with part one being announced as operational on April 28, 2022 for long English cucumbers.
The trial’s goals are to increase the yields, reduce the spread of pathogens like powdery mildew, and reduce the overall cost per unit of production leading to an increase in margins.
CO2 GRO’s VP Sales & Strategic Alliances, Aaron Archibald commented, “Having a Trial on two distinct vegetables under one roof is a first for us as well as being in Alberta which now has over 200 greenhouses. It will provide The Cucumber Man with further demonstration of CO2 Delivery Solutions™ ability to improve yields and financial returns to growers and additional data for CO2 GRO. We look forward to the Trial’s success that will lead to further greenhouse opportunities in Alberta and Western Canada”.
Very interesting technicals. We have a huge green engulfing candle quite close to the major support of $0.15. We have also closed above a downtrend line which would mean a new uptrend is beginning. The stock can see a pullback but must remain above $0.175, or above the downtrend line, to remain in an uptrend.
The next resistance zone comes in at $0.26-$0.275.
–Vishal Toora
