Olive oil price surge, page-7

Showme, as is generally the case with agri stocks probably the primary thing you want to pay attention to with this stock is the weather.

Most Australian investors seem to worry about the risk of drought when it comes to horticulture stocks however I think you could argue that flooding is probably a bigger danger. A drought encroaches slowly, providing farmers time to take precautions, but by comparison a sudden downpour of flooding rain is harder to foresee.

You may remember about five years ago large areas of Victoria were impacted by flooding: AAP (or Redisland, as it was known back then) was caught up in this, with about 60% of their olive trees at Boort being submerged by the floodwaters. Unsurprisingly the share price took a beating as a result of this disaster, falling from above 2c down close to the 1c mark.

Fortunately it does seem that AAP are now finally in recovery mode.

Of course at the moment there are concerns around the impact El Nino on Australian agriculture stocks, but one point in favour of AAP is that olive trees are hardier than most tree crops. Still, there was a couple of 40 degree days at Boort within the past week and enduring too many successive super hot days isn't healthy for any tree.

Bear in mind there are two olive growers listed on the ASX: Apart from AAP there is WA based FLR (Frankland River Olives). Both are tiny and illiquid, many wouldn't buy either of them, but I have no doubt AAP is the better bet. I personally don't consider FLR to be 'investment grade' even by micro-stock standards as it is 90% owned by one shareholder.

As one of only two ASX listed olive-growers, I think there is potentially significant upside for this company, provided the management play their cards right.