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krk004

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The often lateral-thinking Gregor MacDonald looks at a recent statement by the Indian PM that they will need 40% more hydrocarbons over the next decade and sees it as an indication of the ever increasing pressure on their food supplies. He points out that they currently have only 0.14 hectares of arable land - not much more than a quarter acre block - on average to feed each of their citizens. He suggests India needs the hydrocarbons for fertilisers as much as for transport or electricity.

 

http://gregor.us/fossil-fuels/food-and-ene...all-from-india/

 

China is even worse off than India, with only about 0.11 hectares of arable land per capita according to this webpage.

 

http://www.tradingeconomics.com/china/arab...on-wb-data.html

 

During the Great Leap Forward the communists under Mao thought that they could revolutionalise cropping. It involved such extremes as shaving the heads of women so as to use the hair for fertiliser, demolishing tens of thousands of mud and straw homes also for fertiliser, deep ploughing by hand to as much as a metre deep to somehow improve yields, and the practice of close cropping, the logic there being explained by the crazy man himself: "with company [the seeds] grow easily, when they grow together they will be more comfortable". A recent study of that period claims that these revolutionary ideas contributed to the untimely deaths of at least 45 million people in the period of 1958-62.

 

These days, the Chinese tend to use more conventional practices such as dosing the soil up with stock standard fertilisers (though they still underuse potash by about 35% apparently).

 

In this year's PrimeAg annual meeting its chairman commented on the loss of arable land for production of food and fibre due to the growing demand for biofuels. Not so much a problem in India, China or for that matter Australia I would think. It certainly is a big issue in the US where something like a third of the maize grown is used for production of biofuels and where the relevant regulator is apparently about to up the mix of biofuel allowable in petrol from 10% to 15%.

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I have to say that there is still very little sizzle about agribusiness stocks. There's a couple of posters on hc that try to keep the pot simmering and here on ss I think most are still too bruised by what happened in 2008 to talk openly of agribusiness as being an investment theme. My default newspaper is the Sydney Morning Herald and it has hardly got on board gold as a positive story yet so they are months if not years away from picking up on agribusiness as an investment theme - what happened to all those Pitt St farmers? Don't they buy newspapers.

 

Anyway here is a rallying article (and note it is from the UK, not Australia)...though I think it is based purely on the views of the Comm Bank

Shares in Australian farm companies are, thanks to firm food commodity markets, to continue a period of outperformance which has seen them return more than twice as much as other stocks, analysts believe.

 

Money invested in stock in agribusinesses will return 34% over the next year, far higher than the 18.7% expected for the average Australian share, analysts' forecasts show.

http://www.agrimoney.com/news/australian-f...ming--2451.html

 

 

 

 

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When cockies can't think of anything smart to say to each other they begin to talk about the weather. When investors and analysts can't think of anything smart to say they begin to talk about mergers and acquisitions....

 

There's lots of rain about to keep the cockies deep in conversation and it seems that just about every agribusiness stock listed on the ASX is the subject of m&a chatter.

 

Graincorp (GNC) apparently could be prey or may even by predator.

 

http://www.agrimoney.com/news/graincorp-be...unts--2454.html

 

Today's Fin Review has a small piece on Bega Cheese taking a small piece of Warrnabool Cheese (WBL). Bega apparently paid a very cheap $2.90 per share for 15% of WBL and there will be a 1 for 6 rights issue at an even cheaper $2.50 (though strangely for this industry there are no bonus shares being issued to the wives of shareholders as compensation for them not clearing off with the milkman).

 

Also in the Fin Review today there is speculation that the various sugar mills are in the mix. Apparently the Thais who are buying 19.9% of Maryborough (MSF) from Guiness Peat actually want to buy the whole show which may thawt the US crowd Bunge from having a crack at MSF. And France's Louis Dreyfus is thinking about trying to put consolidate all the assets of MSF, Mackay Sugar, Proserpine Sugar Mill and Mosman into one operation. If there were any consolidation apparently the new entity would be of big enough to also bring the Chinese Bright Food back in (but they have been running around making and then withdrawing bids for food companies all over the place - too much red cordial perhaps).

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  • 3 weeks later...

Here is a succinct explanation of the proposed law regarding foreigners buying up agricultural land.

 

http://www.claytonutz.com/publications/new...s_on_farms.page

 

Probably a good thing on balance imo. The problem with the existing system is that that 99% or something of Australian farms are family businesses and therefore tend to be relatively small. If a foreign operator wants to acquire a large rural holding in almost every circumstance they would need to do so by buying up numerous family farms over time. As each acquisition would be well under the existing threshhold price that would attract the attention of the FIRB almost all moves by foreigners goes straight through to the keeper undetected.

 

What is proposed should not block foreigners from buying rural properties but should mean the process is regulated.

 

I wonder whether they thought of including water rights into the bill. My impression is that several foreign groups have already purchased substantial amounts of water rights in the Murray Darling Basin and without access to water rights a fair chunk of our agricultural land is not much better than semi-arid scrubland.

 

FWIW it strikes me that Nick Xenophon clearly tries to add value to the legislative process and though I find Bob Brown to be pretty much a spoilt brat Christine Milne also seems to be driven by altruistic intentions. I reckon that Bill Heffernan and a lot of the Nashos will also support this bill, not sure about the laborites, but anyway I think Senators Milne and Xenophon should be congratulated for this move.

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WeÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ve had a couple of visitors down here from Canowindra the last few days & stold us of whats happening up that way.

 

 

Over the last three years thereÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s been quite a turnover of properties around Canowindra, most sold to fairly innocuous & seemingly unconnected business names. The typical mixed farming or cropping property around there has been 1500 to 3000 acres in size. The surprise is that some 80,000 acres of interconnected properties are now operating under one consolidated management. The owners have now come out of the closet & been revealed to be a consortium of Saudis & their purpose is to produce food exclusively for export to the middle east. I know the Malaysians & Indians have done similar with cattle properties in the north, but I hadnÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t realised the extent to which this has been happening across smaller family farms in the eastern states.

 

These are not listed entities & I suspect these farms are intended to supply Saudi & insulate them from commodity prices in years to come, even give them leverage to influence sale prices to the Middle East. Whether there is anything flowing to Australia from what is produced, is another question. Already there are indications they are bringing in workers from outside, with so-called Malaysian & Indonesian ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¹Ãƒƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“specialistsÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ being brought in & housed on the properties. TheyÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢re seen there by locals working on the properties, but they have no contact & understandably there is increasing concern at the steadily increasing fall in the call on local labour.

 

 

 

 

Mick

 

 

 

 

 

 

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  • 3 weeks later...

Who'd be a cocky eh?

 

This article indicates that half of the wheat crop is now only good for animals. Maybe the next crop will be the one that returns the good times for broadacre farmers. A lot of hopes riding on the cotton crop...

 

http://www.agrimoney.com/news/more-than-ha...feed--2592.html

 

It also points out how dumb the management of ABARE is. Why would you release data release that has clearly been made obsolete by several weeks of flooding rain that has stuffed up harvesting. I reckon the boss of ABARE should swap jobs with the chairman of cricket selectors, Andrew Hiltditch, as then at least both of them would actually have an excuse for being so clueless.

 

 

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  • 2 weeks later...

I may have it entirely wrong but I continue to think that the elephant in the room for many agribusinesses is cotton.

 

NAB is projecting that Australia will produce twice as much cotton as it did last year in an environment where cotton continues to sell at record prices. Brazil is also expected to bring in a bumper crop at the same time our stuff comes into the market which may put downward pressure on prices but my guess is that many farmers have been locking in some of their expected crops at current high prices. La Nina may be a real problem for Qld cotton farmers - I see Dalby had some flooding this week - but further south heavy summer rain is far less likely (?).

 

Supply fears had centred, besides on China, where output is due to fall by some 6% in 2010-11, on Pakistan, where floods are expected to cut production by 8%, and on America, where storms in Texas have curbed crop hopes.

 

However, Brazil is expecting a jump of 45% to 1.22m hectares in its harvested area, after high prices stimulated sowings.

 

NAB estimated the cotton crop in Australia, the world's third-ranked exporter, at 3.8m bales in 2010-11, around double the levels of a season before.

 

http://www.agrimoney.com/news/nab-cautions...high--2635.html

 

Note that whilst we are a major exporter of cotton our production levels are dwarfed by countries like China the US and Pakistan. For instance using the latest set of figures I could find even if our production increases by 1.9m bales that will fall well short of covering the expected reduction in production in China (of 1.5m bales) and Pakistan (of 0.6m bales) though a 45% increase in Brazil's crop could well bring another 2m bales into the market.

 

http://www.nationmaster.com/graph/agr_cot_...tton-production

 

 

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  • 2 weeks later...

The poor old cane toads are getting a drenching...

 

http://www.businessspectator.com.au/bs.nsf...ent&src=hp3

 

Some obvious bs from the pollie in that these floods are clearly not of the scale of what hit Ipswich and Brisbane in '74. Nevertheless just as there is no such thing as a minor firefight for an infantryman these current floods would be bad enough in the eyes of those directly affected.

 

It's obviously been a moist December right down the east coast. For instance Emerald has so far had 263 mm this month when its December average is 81 mm, Dalby surprisingly has had not much more - 113 mm - than its December average of 83 mm, Gunnedah has had its wettest December in 130 years, getting drenched with 232 mm as against its average of 68 mm, and Wagga Wagga has had close to four times its December average, recording 151 mm this month so far as against its average December rains of 44 mm.

 

But to put it into perspective from the investment angle, Cotton Australia reckons that less than 1% of the national cotton crop has been lost to the floods so far. They are still making the call that this season's crop will be the largest cotton crop ever in Australia.

 

http://www.businessspectator.com.au/bs.nsf...ent&src=hp9

 

From a purely mercenary point of view, lots of fencing to be fixed, lots of weeds to be sprayed, lots of bugs to be zapped, lots of crops to be grown, lots of cattle to be dipped ... and still the only movement within the agribusiness sector seems to be when a foreigner casts a coveting eye over one of the group.

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Big call to say these floods clearly don't match those of Brisbane and Ipswich in 1974.

 

In terms of lives lost thankfully you're right. Same goes for the number of people directly impacted. The number of houses impacted and infrastructure damage will probably be less too. Adjusted for inflation the cost will probably be less too. But in terms of areal extent and volume of water this dwarfs '74.

 

Time and place are so critical in any of these discussions. Hurricane Katrina 100miles east or west of New Orleans would have packed the same punch but been less catastrophic to people and place. I shudder to think what this rain event shifted a 100miles south-east would've done. I suspect you'd be categorically right then.

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  • 4 weeks later...

Well the floods took a tragic turn since my last post on this thread. One angle of this is the probability that lots of farmers who have been doing it tough with the dry for a good number of years have now been done over by the wet.

 

Meanwhile cotton prices have gone crazy and are now nearing 140 year highs, at levels not seen since the American civil war (in the 1860's). Great news for the cockies that still have cotton in the field not yet sold, a tad frustrating for cockies who forward sold a few months ago and a killer for those cotton farmers who forward sold their crop and have now been wiped out by the floods.

 

http://www.theaustralian.com.au/business/i...o-1225994817621

 

Apparently AAC cotton has taken a big hit, parts of PrimeAg's 15000 ha cotton crop has been lost but overall they think they are travelling okay and some of the lower parts of Tandou's 4000 ha cotton crop had wet feet for up to 5 days but should recover okay. Namoi Cotton (NAM) don't do that much business in Qld and generally speaking the NSW cotton crops have come through well, with much larger acreages planted this year than in recent years. I can't think of any other listed companies with direct exposure to cotton...

 

 

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