I have been bullish on the agriculture space. Perhaps my favorite sector after precious metals. It all began on a hot summer night in 2021 on the west coast of Canada. I outlined my thoughts on why I was going all in agriculture in my piece titled “Why I am going big on agriculture after the record heatwave“. In that article I outlined my 4 fundamental reasons. They will be briefly summarized below, but be sure to check out my full piece for more details. The reasons I was, and still am, bullish on agriculture are as follows:
- Jim Rogers (under the radar sector and no young people want to work hard to be farmers anymore. A lot of farmers are hitting very old age)
- The Weather (pretty self explanatory but unpredictable and erratic weather will mess up planting and harvesting)
- Supply Chain Issues (already seeing the effects of this now)
- Green/Clean Energy (if we go full solar and wind, these need to be built where there is a lot of sunlight and wind. This tends to be where the best farming land is situated)
Little did I know that geopolitics would be a reason, and the breadbasket of Europe would be invaded.
Since that inaugural agriculture post, I have followed up with weekly agriculture sector roundups. I have provided my readers with an opportunity to play wheat, soybeans and corn just before they broke out of major technical patterns. One of my New Year 2021 market outlooks. Readers saw our targets hit within the first three months and the uptrend continues to this day.
I even warned readers about a potential fertilizer/potash shortage way before the Russia-Ukraine situation began. I have done a follow up piece recently on shortages which can be read here. For macro players, these are the countries I would be worried about:
In summary, my agriculture readers are happy readers. Due to the popularity in this space, I have been asked what are some of the best ways to play agriculture in 2022. There are various ways. I do recommend readers to have a major player that pays a dividend. Whether it be Deere, Nutrien, or my personal favorite, Loblaws. The latter might not be typical agriculture, but higher food prices are connected with agriculture obviously.
In this article, I have decided to list three smaller cap companies on the Canadian exchange dealing with various issues in agriculture. Something for everyone.
These companies are some of the most popular companies among my readers, and are companies that I have put my own money in (Disclaimer: I own shares in all of them).
The agriculture space will be seeing a big interest in upcoming months. We will be seeing headlines of food shortages and higher food prices. This is your time to get ahead of the crowd.
EarthRenew (ERTH.CN)
EarthRenew produces and sells organic fertilizers from livestock waste in North America and Europe. It also produces electricity from natural gas using an industrial-sized gas turbine and supplies to electrical grids and cryptocurrency miners. The company sells fertilizers under GrowER and GrowER Biochar names.
The company produces organic fertilizer production through their patented thermal processing technology transforming livestock manure into the good stuff for plant growth and restoring soil health. This organic fertilizer also offers 20% to 40% higher yields than the equivalent chemical fertilizer! And it’s good for the environment! $70 million has been invested into both the development and commercialization of this technology.
Recently, it has all been about the acquisition of sustainable fertilizer innovator Replenish Nutrients. Replenish Nutrients delivers leading regenerative fertilizer solutions to support a farm system that puts healthy soils and grower profitability back on the table. By combining Canadian-sourced nutrients with their proprietary delivery system, they have developed a sustainable alternative to synthetic fertilizers that enhances overall soil function and biology while providing valuable plant-available nutrients farmers rely upon for healthy crops.
The company is looking to benefit from the supply and demand imbalances in the current fertilizer market. EarthRenew is scaling up production at its Beiseker prototype facility in Alberta, and are securing a number of blending sites to increase production of their regenerative fertilizer.
We here at Equity Guru are big fans of EarthRenew. The guru himself, Chris Parry had great things to say about the company in one of his recent daily rants:
The most recent news had to do with Q4 and full year 2021 earnings. Here are some highlights:
- On a consolidated basis, the total annual revenue of EarthRenew was $12.3 million.
- On a proforma basis the consolidated revenue with the acquisition of Replenish would have been $15.2 million representing an approximate doubling of fertilizer sales from the previous year (on a combined basis)
- EarthRenew is reporting $7.7 million in revenues for the fourth quarter of 2021, generating a gross margin of $2.2 million or 29% and an overall net loss of $(432,737), while generating positive earning before tax during the fourth quarter in the fertilizer segment of $495,871.
High prices for synthetic fertilizer coupled with record grain prices for canola, barley and wheat combine to create a strong seasonal sales environment for sustainable fertilizers. Said CEO Keith Driver, “The last year has been extraordinary for us. We have put ourselves on the map with the acquisition of sustainable fertilizer innovators, Replenish Nutrients who have proven the Company’s ability to deliver on revenue targets. Now we are looking ahead and forecasting an increase in revenue from fertilizers of approximately $24 million for 2022.”
Mark May 19th 2022 on your calendar. This is when EarthRenew will provide us with forward guidance.
When it comes to the stock chart, I told Equity Guru readers that this stock is one of the best looking technical setups on the market. The breakout was called in my article about EarthRenew back on February 16th 2022. I even made a video laying out the technical setup:
Readers who have followed my work have a nice 100% plus gain on the stock. The good news? The uptrend structure still holds! Note my uptrend line which we are retesting currently. So far buyers have stepped in and the uptrend has continued. More higher highs and higher lows are possible as long as this structure holds. The technicals are solid, and the macro fundamentals are also positive. We have an alignment of both fundamentals and technicals. A winner in my book.
Water Ways Technologies (WWT.V)
Water Ways is a global provider of Israeli-based agriculture technology, providing water irrigation solutions to agricultural producers. They focus on developing solutions with commercial applications in the micro and precision irrigation segments of the overall market. Current main revenue streams are derived from project business units and component and equipment sales.
The company has 138 completed projects in multiple countries including China, Uzbekistan, Chile and Mexico just to name a few.
If you take a look at their press releases, you see tons of positive and consistent news regarding new projects and orders.
Water Ways reported 2021 financial results on Thursday April 28th 2022. Here are highlights including record sales of CAD $20.2 Million:
- Total Revenues for the year ended December 31, 2021, increased 59% to CAD$20.3 million compared to CAD$12.7 million for the year ended December 31, 2020.
- Service Project revenue stream increased substantially to CAD$8.7 million compared to CAD$3.1 million for the year ended December 31, 2021 and 2020, respectively, for total project revenue growth of 180%.
- The Company installed and delivered the largest contract in its history, in Uzbekistan, resulting in revenue of over CAD$4 million.
- All the Company’s operating subsidiaries achieved record sales.
- Strong 2021 Q4 sales CAD$4.5 million compared to CAD$3.2 million in Q4 of 2020, an increase of 41% Year over Year.
- Adjusted EBITDA of CAD$0.2 million compared to a loss for the year ended December 31, 2021 and 2020, respectively (Company’s definition of “Adjusted EBITDA” can be found in the MD&A, a non-GAAP measure with adjustments driven substantially by Share based payments).
- As of December 31, 2021, the Company’s cash and cash equivalents were CAD$3.3 million, compared to CAD$0.4 million for the year ended December 31, 2020.
- As of December 31, 2021, total working capital was CAD$4.6 million compared to CAD$0.02 million as of December 31, 2020.
- Share price increased 566% from CAD$0.045 in December 31, 2020 to CAD$0.30 as of December 31, 2021.
- The Company completed an oversubscribed private placement of CAD$4.5 million in August 2021.
The stock hit record highs of $0.445 earlier this year before topping off. I was watching for a bounce at the uptrend line which coincided with $0.35. Unfortunately, this did not happen. The stock found some support at $0.275. The month of April 2022 saw the stock do nothing but range. There was no momentum taking the stock higher.
I am watching $0.275 to act as support again. If this breaks, I would watch the $0.25 psychological level, but a better support comes in at $0.225.
MustGrow Biologics (MGRO.CN)
When it comes to the agriculture space the one thing I love is innovation. Human ingenuity and genius at its finest.
One such company that has caught my eye is MustGrow Biologics. An agriculture biotech company focused on providing natural science-based biological solutions for high value crops, including fruits & vegetables and other industries. MustGrow has designed and owns a US EPA-approved natural solution that uses the mustard seed’s natural defense mechanism to protect plants from pests and diseases. Over 110 independent tests have been completed, validating MustGrow’s safe and effective signature technologies.
The product, in granule format, is EPA-approved across all key US states and by Health Canada’s PMRA (Pest Management Regulatory Agency) as a biopesticide.
MustGrow has now concentrated a mustard extract biopesticide in liquid format, TerraMG, and with regulatory approval, could be applied through standard drip or spray equipment, improving functionality and performance features. In addition, the Company’s mustard-derived extract technologies could have other applications in several different industries from preplant soil treatment, to weed control, to postharvest disease control and food preservation.
The company’s technology is definitely attracting the eyes of big players. Japanese company Sumitomo Corporation and MustGrow announced an exclusive agreement in Summer of 2021 to evaluate MustGrow’s technology to determine commercial potential.
Sumitomo Corporation has the option to acquire exclusive rights to MustGrow’s technology for preplant soil fumigation, bioherbicide, postharvest and food preservation for potatoes, and bananas in North, Central, and South America. Field trials are on going and so far, successful.
The company pulled off financing, including a substantial upsizing from $2 million to $6.9 million at a price per unit of $2.60, including Ira Gluskin and Gluskin-related parties.
In 2022, MustGrow announced two more exclusive agreements with Bayer and Janssen PMP, a division of Janssen Pharmaceutica NV, one of the Janssen Pharmaceutical Companies of Johnson & Johnson.
Bayer has the option to acquire exclusive rights to MustGrow’s technologies for preplant soil fumigation, bioherbicide applications and postharvest food preservation of potatoes including sprout inhibition in the regions of Europe, Asia Pacific, Middle East and Africa.
Janssen will test and develop MustGrow’s biological mustard plant-based technologies for certain postharvest food preservation storage applications globally.
MustGrow stock had a great 2021. In 2022, the stock has pulled back and has been kept in a range between $3.00 and $4.00. The stock is testing the major $3.00 support zone as I write this article. I expect to see a wall of buyers here, just as we saw with the test on April 28th 2022 with the large hammer wick candle.
Big names have their eyes on MustGrow’s technology. Field trials are ongoing. This is a stock that just needs that final positive catalyst for a major move. Buyout candidate anyone?