Australian Agricultural Stocks

Well, what drives the Aussie economy? Higher commodity prices will add to our exports. Exporters…coal companies, iron juniors, grains marketers and other stocks related to the agricultural industry will make more money from the same amount of work.

The world is crying out for food. Will this demand have an input on our fertilizer and agriculture stocks? I think so.

In this series of articles, we shall have closer look at some relevant agricultural stocks.

The middle class in Asia is tending towards western food, therefore the rising demand for food – from China and India in particular – has rapidly increased the global call for these products. This has led to demand outstripping supply, steep price rises and delays in sourcing additional tonnage.

Not only will these conditions tend to increase the cost of farm products, it will certainly increase the cost of farm input, e.g. fertiliser, machinery, and so on.

So let us first of all have a look at some relevant Australian companies which are actually producing food.

Nufarm Limited (NUF)

Nufarm Limited is an international agrichemical company involved in the registration, manufacture, marketing and sale of branded, off-patent crop protection products. The Company operates in most major global markets. In 2004 the company made a major investment in Brazil, one of the world's biggest crop protection markets.

Chart as at 1 April 2008

We can see here that NUF has formed 2 nice channels and broke out of both of them. The latest breakout closed the gap formed in December 2007. This is a good sign that we may have further upside.

ABB Grain Limited (ABB)

ABB Grain Limited is a vertically integrated agricultural commodities company involved in the provision of storage, processing, logistics, marketing and trading services. Based in South Australia, ABB accumulates grain from grain growing regions throughout Australia and New Zealand and exports it to around 40 countries.

Chart as at 1 April 2008

ABB is in a nice, steady uptrend and has reached resistance at about $9.00. It had recently one false breakout, the next breakout just may see it moving to new heights.

GrainCorp Limited (GNC)

GrainCorp Limited provides handling, storage, marketing, logistics and agronomic services to the Australian grain growing industry. The company services around 50 domestic and export grain buyers including The Australian Wheat Board. GNC has progressively shifted its focus from agri-business to agri-food business.

As you can see on the chart below, GNC commenced a Stage 2 uptrend and is now forming a corrective consolidation pattern. We could either trade this channel now or wait for a continuation of Stage 2.

Chart as at 1 April 2008

AWB Limited

AWB Limited is Australia's major national grain marketing and management organisation. AWB's activities include pooling and marketing all bulk exports of Australian wheat as the nation's former exclusive bulk exporter, and providing a range of financing and risk management products to growers. AWB also undertakes activities in other areas of the grain value chain, including wheat acquisition and trading, grain storage and distribution, grain seed marketing and technology and end-use operations.

Chart as at 1 April 2008

AWB has finished Stage 4 in October 2007 and is now in Stage 1. We can either do some nice channel trading or wait for a breakout into Stage 2. Good opportunities both ways. Are you a trader or an investor?

Australian Agricultural Company Limited (AAC)

Australian Agricultural Company Limited is a cattle producer, selling to the Australian food industry. AAC operates an integrated cattle production system on over 21 cattle stations in Queensland and the Northern Territory.

Its beef cattle are supplied to the Australian markets as well as export markets in the US, Japan, South East Asia and the Middle East. After being established by Royal Charter in 1824, AAC was incorporated in 1976 before being re-listed in 2001.

AAC is has penetrated the lower range of an up-trending 2 standard deviation channel. It may be worthwhile to see if the price enters the channel again and trade within the channel.

I will continue this series next week with a discussion on fertilizer stocks, followed bys some more agricultural stocks.

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