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Agricultural Companies listed on ASX


krk004

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The Fin Review today notes that Guinness Peat Group (GPG) has taken on a new chairman whose task it is to accelerate the liquidation of the company's portfolio of stocks.

 

GPG has substantial holdings in several listed agribusinesses: Tandou (TAN) 24.95%, Ridley (RIC) 22%, PrimeAg (PAG) 16.9% and Capilano Honey (which is listed on the Bendigo Stock Exchange but is majority owned by beekeepers) 9.4%.

 

Were GPG to attempt to sell off these holdings on the open market no doubt it would depress prices so I guess it would be to GPG's advantage to look for off-market trade sales. I am sure management of the various companies would also be trying to introduce friendly institutions to GPG to help stabilise their share price and share register.

 

Guinness should do okay from its parcel of Tandou shares. Last year it was a pest for a number of months with what appeared to me to be a faux takeover bid in which it did a David Tweed with a below-market offer to mum and dad holders. From memory they were paying about 30 cents a share when the market price, and the price that several institutions paid to get in, was at least 10% more. I would expect that there would be other institutions willing to buy a block of TAN shares, seeing it is a unique beast (a listed water investment company). Not so sure about Ridley and PrimeAg though (?).

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Latest musings about where we are at with the current la nina (though it is from an investment bank). My understanding is that we were moving rapidly towards a neutral state - neither el nino or la nina - so that all regions could expect good growing conditions in the next season or so.

 

But if this la nina comes in strong again then I guess we can expect another series of crop failures and a flow-on of prices increases in various soft commodities.

 

http://www.agrimoney.com/news/la-nina-thre...ices--3012.html

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Agribusinesses get maximum exposure in today's print version of the Weekend Fin Review. (sorry no link).

 

The front page is dominated with white lettering on a solid blue background (the combination that stands out most clearly apparently) in mega font size: " BOOM GOES THE FARM" followed by the sub-headline: "As soft commodity prices rise and rise, investors could be set for another ride to prosperity on the sheep's back" and then down the bottom graphics showing that Cattle is up 37%, wool 61% and cotton 166%.

 

The actual articles are pretty much an intro to the agribusiness scene and a rehash of past events (mainly about foreigners picking up local companies). From what I can see there is nothing much in them that many on ss would not already know about.

 

However the frontcover is perhaps notable in that the Fin Review is shouting that agribusiness is no longer the page 16 investment opportunity that Don Coxe likes to look for but is now the page 1 story that most fundies and mums and dads would be well aware of.

 

Speaking of Mr Coxe - I've lost contact with his weekly audio talks again - I recall how the last soft commodity bull was brought crashing down by what he claims was a co-ordinated effort of Ben the Benack and the then Treasury Secretary Hank Paulson on 13 July 2008, in what he called "the midnight massacre". There does not appear to be as much chatter this time around about the hedgies and the speculators manipulating soft commodity prices as there was in 2008 but with Brent oil only less than US$20 below its 2008 high, with food prices being blamed in part for instability in north africa and the middle east and with the USD again under downward pressure (?) the authorities may feel inclined to step in again.

 

http://www.mineweb.co.za/mineweb/view/mine...7&sn=Detail

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Rabobank has positive vibes about our winter crops, on the back of good moisture levels in the east and good commidity prices. A main worry has to be how wet will it be in the east and how dry in the west. Pretty much comes down to how determined the current la nina is to hang around, I suspect.

 

http://fw.farmonline.com.au/news/state/agr...nk/2141629.aspx

 

Meanwhile the yanks are experiencing the other side of the la nina, with snow and bushfires and tornadoes. Talk about high maintenance.

 

http://news.discovery.com/earth/spring-wea...oes-110421.html

 

Those whacky texans have even thought it necessary to turn to state-sanctioned prayer.

 

http://paul.kedrosky.com/archives/2011/04/...imes_ahead.html

 

But all the adverse weather events caused by the la nina event, and possibly the warm pocket over the artic, is what is allowing soft commodity shortages to persist and the prices to remain elevated.

 

If rural supply outfits cannot make buckets of money in these conditions then what hope have they?

 

 

 

 

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Long time since I - or anyone else for that matter - posted on this thread.

 

Agribusiness remains one of my three areas of investment focus but I came to the conclusion last year that the sector was generally carrying far too much debt and was trying to make a profit from assets that were way overpriced. That and the short termism of the market's focus on locally listed agribusinesses was causing many of the players to be operating mainly for the financial security of employees and service providers rather than shareholders. As such I thought there were other places I could dwell on for the time being.

 

But I came across this tidbit today, about the Singapore based agribusiness Olam. It appears that they are under attack from a shorting operation called Muddy Waters. This looks like standard fare for MW and its boss, Carson Block, who've had some fantastic success in claiming to expose dodgy accounting / reporting tricks by listed companies at the same time as they commence shorting the crap out of the stock. So far their success has been with Chinese companies - and in my personal experience it would be an exception to the rule for a Chinese business not to be cooking the books somehow - whilst Olam is based in Singapore and has the government controlled Temasek in its corner. I have no personal knowledge of Olam but my guess is it will be a far harder beast for the likes of Carson Block to shake down than your typical mainland Chinese operation.

 

http://www.bloomberg.com/news/2012-11-19/o...s-accounts.html

 

Olam does have a presence in the local agribusiness sector. They bought Qld Cotton in 2007 and bought 12,000 ha of almond orchards from the Timbercorp wreck in early 2010. Their website says that they are also into grain, pulses and wool locally, and the fact that they control 90% of the world's peanut market suggests that they may have a finger in that local action as well.

 

There is no suggestion that Olam is under any threat to it being a going concern or that it will need to liquidate any of its Australian assets but it got me thinking.

 

http://olamonline.com/locations/worldwide/...lasia/australia

 

My point is that back when Olam was buying up agricultural assets in Qld and around Mildura there may have been some who were fearful that we were selling off the farm to foreigners. Similar reaction with the sale of Cubby Station to some Chinese and now the development of the next stage of the Ord. But it seems to me that these things work in cycles and that more often than not the foreigners end up buying at the top of the cycle for top dollar and /or that in due time those assets end up back on the market at fire-sale prices where you can actually make a quid from the business.

 

It strikes me that there needs to be a seismic change in the pricing of local agricultural assets, as in the cost of land. I reckon too many farmers are camped on real estate that does not give anything like an acceptable rate of return, with most of them hanging on largely on the speculation that their overpriced land will continue increasing in market price. I am not sure what will bring about this reset - 10 years of drought did not (I know blokes who struggled through the driest decade in over a century but the market value of their properties kept going up each and every one of those years of lost production). Maybe it will be China taking a tumble that will bring it about.

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Triage, I dont believe it is overpriced agricultural land that is the cause of problems in our agricultural sector. Labor and service costs have risen much more than land values, as have bank fees and government charges.

 

Most farms are probably worth less than a concrete box down by the beach. I'm happy to stay on my bit of ground for my retirement even though it will probably appreciate less in value than that box on the beach.

 

I think corporate farming will not be successful in Australia for the same reasons farming wasnt successful in communist countries, they dont have enough at stake. They seem to do ok in the US, but they have the farm bill there. Here it is survival of the fittest, probably not so good for the hip pocket, but I think it has served us well with an efficient farm sector overall, still dominated by family farms.

 

I dont have any problem with overseas companies buying into our ag sector, as long as the reverse is also possible. If countries prevent us buying their farms, I cannot see any reason we should allow them to buy here.

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Most farms are probably worth less than a concrete box down by the beach.

 

Come on Fred, you're comparing apples and oranges. Mate here's what you'll likely pay for a pup that has a chance of turning into a good working dog that will end up doing the work of a couple of stockhands...$400 to $600 looks to be about on the money...

 

http://www.workingstockdogdeals.com/forsale.html

 

...and here's what you pay for a bloody yap yap that will never save you a cent or make you a dollar ...between $1000 to $1250...you pay twice as much for no output.

 

http://queensland.pups4sale.com.au/categor...e_Terriers.html

 

But they're catering for different markets. People are willing to pay a premium to pamper themselves and so they are willing to pay up for something that makes them feel good. Same goes for comparing beachfront houses and working properties. Apples and oranges.

 

You'd be better off comparing the earning capacity of a coffee shop or a bakery to that of a farm (not comparing life styles or skills or status or anything else but just on pure earning capacity) and see what you have to pay for comparable profits.

 

Anyway I've argued about this with family for a long time and I know I don't "get" how people of the land views things so I'd best leave it at that.

 

The main point of my previous post was supposed to be that the prices paid for agribusinesses are pretty much like most other things in that they go in cycles, and often outsiders tend to buy at the top or sell at the bottom. My feeling is that we should not get too fearful of selling off the farm.

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