keep an eye on SOI (SOIL SUB TECHNOLOGIES) on your watchlist...this is why...
SOI....is very cheap at these levels...
being compared in the likes of IPL ...which is currently trading at $170, comparde to SOI at 40 cents..
SOI strong buy up to 80 cents..
WISE.OWL have a buy rating up to $1.00 on SOI.
they have a US 30MILLION BIO-DISESEL PROJECT...
read below.
Broker picks in the soft commodities sector Jill Fraser - April 2, 2008
Analysts: Tim Morris, wise-owl.com; Michael Hevern of the stockmarket newsletter StockCubes and Audrey Riddell, IBISWorld
Stocks: Incitec Pivot (IPL), Soil Sub Technologies (SOI), Nufarm (NUF), Australian Wheat Board (AWB), GrainCorp (GNC), ABB Grain (ABB)
In case you haven’t heard, soft commodities are the sexy ‘new black’ and being taken along for the ride are its closely related but decidedly un-sexy cousins, fertilizer stocks. Across the board the price of goods in the soft commodities sector (agricultural products such as wheat, corn, barley) have skyrocketed over the past 12 months, signalling the end of cheap food.
It is a case of supply and demand, says Tim Morris, equities analyst at wise-owl.com. "An increase in food demand globally due to limited land versus a growing population means more mouths to feed from the same resource," he says.
Audrey Riddell, an analyst for IBISWorld argues that one of the main drivers is poor production coming out of Australia over the last few years due to the drought. We have a large enough production base to affect world markets.
Other drivers include the movement to bio fuels (this year a third of corn crops in the US will be devoted to ethanol production) and rising incomes in developing countries, which is causing a shift in eating patterns from predominantly rice to more meat based diets (a rise in meat production equals a rise in grain production - seven kilograms of grain is required to produce one kilogram of beef).
Another significant factor pushing up prices is the amount of speculative money that has entered the soft commodities market. In the current market environment, investors are looking to alternate asset classes away from the volatility of equities. Also, a number of commodity investment funds have sprung up in recent times.
"Uncertainty in the market associated with global warming and inconsistencies in the weather lead people to believe that there isn’t as much reliable crop land available as we once thought," says Riddell.
Projecting ahead, opinion is divided as to how this trend will play out. While most analysts predict robust prices in soft commodities well into the next decade, Morris expresses caution. "I definitely think there are some powerful long-term trends here, but I don’t know if it’s sustainable in the medium to short term because I think prices may have been inflated due to the impact of the drought," he says.
"There’s also talk that bio-fuels are not the answer to the world’s energy needs," he continues. "So even though bio fuel consumption has grown steadily over the past few years, there are now question marks over whether it’s a help or a hindrance because it’s driving up food prices."
Riddell shares Morris’ prudent note saying, "we think that there is going to be a supply reaction, such as an increased adoption of genetically modified seeds, which will boost production and create an increase in yields and more consistent grain production coming out of India and Western European countries".
Company
ASX code
Analyst recommendation
Share price*
Incitec Pivot
IPL
BUY –StockCubes (Michael Hevern)
HOLD – wise-owl.com (Tim Morris)
$138.28
Soil Sub Technologies
SOI
BUY – wise-owl.com (Tim Morris)
$0.61
Soil Sub Technologies (SOI) – BUY (wise-owl.com)
Recently listed, Soil Sub Technologies (trading commenced 27 March) is an organic fertilizer manufacturer that uses the by-products of sugar or palm oil.
It is early days for the company but Morris likes its exposure.
"They’re looking to drum up contracts in China and we think that the whole organic movement and boosting crop yields from an organic perspective is a trend," he says adding, "but I probably wouldn’t put the house on it yet".
IPL Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)