3 Agriculture Stocks For The Week Of May 20

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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, 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.

This has continued with Fed Vicechair Lael Brainard, saying the case for the Fed pausing rate hikes in September is not something she supports. That the Fed will continue raising rates even above the ‘neutral’ range. 

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.

When I look at my agriculture watchlist, I am seeing signs of recovery as the overall stock market shows signs of reversal. Some stocks are still breaking below support, and some stocks are building a nice base at support. In the following days and weeks, we will have to assess if these support levels hold, and lead to a reversal.

Here are three stocks that have some interesting technical patterns. 

AgriFORCE Growing Systems (AGRI)

Market Cap $36.53 Million

Yes, the stock has seen some large decline percentages, but had a rise of 65% on Monday, May 16, with some follow through. News was released on Wednesday, May 18, 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. Buyers did step in and led to a large gap up on May 16, just a few days before the release of the news. We hit resistance at $3 before pulling back. What next? Well, support comes in at $2. 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. Currently, the stock is testing my intermediate moving average and could see a nice buyers jump in here. Look for a nice green candle!

RiceBran Technologies (RIBT)

Market Cap $37.75 Million

Maybe the hottest stock in agriculture. 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 plans to 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."

RiceBran announced the initiation of a capacity expansion of the company’s Core-SRB facility in Mermentau, Louisiana. This is expected to increase the capacity enabling RiceBran to meet the growing demand for North American sourced ingredients for the companion animal market. The project is expected to be completed in Q3 and is being executed by RiceBran’s own internal engineering team and is to be completed at minimal cost to the company.

“These upgrades provide important redundancy and will allow our rice bran stabilizing facility in Mermentau to match the full capacity of our supply partner, who in turn has made investments over the past two years to minimize historical seasonal downtime,” said core-SRB business lead Garry Primeaux. “Together, with the remediation and enhancement of Lake Charles, these factors add significant to overall capacity to our Louisiana operations, ensuring that we will be able to meet the rapidly growing demands of new and existing customers the companion animal market, with only a modest capital investment.”

The stock is in breakout mode. We confirmed a major breakout on May 18, 2022. 

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. Well take a look at volume on the day of the breakout on May 18, 2022:

Over 12 million shares on the breakout. This is perhaps one of the most, if not the most, exciting looking agriculture set up on the markets.

Where next? The uptrend remains intact as we hold above $0.6250. Buyers have been stepping in everytime we drop to this level. There appears to be some resistance now at $0.7525. If we can confirm a green candle above this level, then the next resistance target comes in at $1. 

CO2 Gro Inc (BLONF)

Market Cap $21.41 Million

Epic surge of volume in the last few hours on May 19’s trading taking the stock up 33.33% for the day. Now, it is all about continuation.

On May 17, 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".

Another trial is taking place at a bell pepper greenhouse in Mexico. Similar goals: increase yield and reduce the spread of pathogens. 

Admittedly, the stock sees more volume on its Canadian listing (GROW.V). But for technical analysts, we have very interesting technicals. We have evidence of the stock being supportive above $0.12. Now this is the exciting part: 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 $0.14, or above the downtrend line, to remain in an uptrend.

The next resistance zone comes in at $0.18-$0.20.

Authored by Vishal Toora, Equity.Guru

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