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Agricultural Companies listed on ASX


krk004

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It just so happens that in today's Sydney Morning Herald there was a piece by an analyst, Chris Gibson of Investorfirst Securities, that looks at the question of why locals do not see the vale in our agribusinesses that foreigners apparently do. It is a far more sophisticated take on the issue then I could muster up.

 

http://www.smh.com.au/business/agribusines...1120-29o07.html

 

Not sure I agree with all of the basis for what he argued - he seems to assume a straight line between the demand for food now and the demand for food in 20 years (whereas I reckon the sector is all about swings and roundabouts) and he also seems to assume that high growth in the sector necessarily means high returns on investment (whereas I've seen research that suggests there is not a lot of corrrelation between the two) - but I'm also not sure that I could put together a cogent rebuttal of his argument so I won't even try.

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  • 1 month later...
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Anyone following SHV - Select Harvest?

Announced an acquisition today, and news of an improving company & market situation (below from ASX).

 

Cheers

Dr_Dazmo

 

The seasonal conditions to date and long term weather forecast continue to be positive and at this stage harvest is anticipated to be underway in February. Including the Agrico acquisition and the company orchards returning to normal yields, the 2013 crop will be between 70% to 80% greater than last year.

 

Following the November update, news of US crop downsizing to less than 1.9 billion pounds (from 2.1 billion pounds) has resulted in the Almond Division experiencing strong demand. The global almond price has continued to strengthen, increasing approximately 25% over recent months inclusive of the impact of the high AUD. Select Harvests has taken advantage of increasing price and booked some forward sales of the 2013 crop.

 

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I see Thorney Holdings currently hold 11.94% after purchasing an additional 621,444 shares from September 2012 to January.

Seems they have excellent timing with the SP moving from around $1.15 to the current $1.75 (+approx 52%).

 

Looks like dividends have dipped in recent times ($0.08FF), but have been over $0.20 a couple of year ago.

If they can get their act together, there seems to be room for some appreciation in the SP just based on potential yield (IMO).

 

Cheers

Dr_Dazmo

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  • 3 months later...

Coming from a top-down perspective I really really like the agricultural sector as a long term investment but after trying to unearth an investment target that looks reasonably viable I have for some time pretty much sat on the sidelines. Three substantial problems I have with the agribusiness sector in its current form are:

 

1. too many agribusinesses are loaded up with far too much debt given how outrageously cyclical the sector is. The old adage that debt supports the farmer like the noose supports a hanged man is so very true imo and yet so many farmers and businesses servicing farmers are up to their necks in debt. I remember reading how successful HK real estate developers manage to ride the huge cycles in that market: they maintain extremely low levels of debt (if any at all), they buy land banks like crazy when the market has crashed, they amble along when the market is so-so, and they are structured to be able to churn out masses of units and shops when the market gets frothy. And from a population of 6m that strategy has produced three of four of the wealthiest people on the planet.

 

2. a related gripe: too many agribusinesses are run by professional administrators that are attempting to apply what they learnt from their MBA case studies (when those case studies are usually of US secondary and tertiary sector companies). Management seem to be compelled to try to produce impressive results on a quarterly basis, they attempt to diversify away from their core business as a way of mitigating the down and flat times, and they load up with too much debt as they are frightened of being accused of allowing the company they are running to have a lazy balance sheet (from having too much fixed assets producing too little regular income) (and also I suspect their KPI's encourage them to dive into debt). This second point comes from the same root problem as the first: a lack of recognition that the business cycle in agribusiness is long and severe.

 

3. and the third point runs slightly counter to the second point: the outrageously high prices that is paid for land (sorry fred, I know you disagree on this). Given that rural land should be valued on economic returns - which is entirely different to the family home or to some extent the holiday retreat - many farmers in Australia pay ridiculous prices for land and then either stoically struggle along on bugger all income or whinge and complain how they were expecting a once in a generation bumper season to get them through and how they should be bailed out because their punt did not come home. Yes I know that the yanks will pay 5 or 6 times for farming acres of what is paid here and that the US government subsidises them much more than our governments do ours. But the reality is that the American famer makes up a smidgeon of the US population and the US farming production is a smidgeon of that economy so they can throw obscene amounts of money at what remains an effective pressure group whereas in Australia's case farming is still relatively large so it is harder to offer the same levels of support and handouts here.

 

Attached is a link to a post from macrobusiness which is based around an article from the blogger, Steven Johnson. Looks like the hard times in the west and the north in particular is bringing on a crisis in the sector and bringing to a head the ugly mix of unsustainably high debt levels and uncommerically high property prices.

 

http://www.macrobusiness.com.au/2013/05/au...an-farm-bubble/

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feels like sit in a elite class, listen to a professor,

mate, keep it up on this topic.

this is the sector that i try to understand and make something out of it, or use it to against future inflation threat.

 

i tried NUF last year, made few buck and got out too early. and kicking myself to see it had great run after sold out...untill last weeks or so it been thumped down after their earning call

it really scared me to put my finger with this sector.

the three point that you made here--------better than gold mate!!

 

i'm gonna cut and paste your post to me mate to give them a good education...if you don't mind!! :P

 

thank you thank you!!

 

 

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Agree with point one, high debt will eventually get you in the agricultural sector. Not always due to the initial outlay in buying the land, often the capital improvements necessary to build up the farm to an efficiently functioning unit, especially when done to quickly are the main cause of the debt. I've seen quite a few farms with minimal debt handed from father to son, who then poured in the money to transform it into a showpiece only to succumb to that debt during a downturn.

 

Second point agree too, but would also add that the increased costs associated with a board of directors, managers etc would never to be able to be covered by the shoestring margins that most farms work under. That's why most family farms survive in a downturn, the main manager, worker, bookkeeper etc works for practically nothing.

 

You're right, don't agree with your third point, I don't think farms with all the associated infrastructure are all that expensive, and the market generally will find that value. I do think houses in Australia are to expensive, putting pressure on ever expanding wages, which I believe is the main cause of the problems of not only agriculture but industry in general being competitive on an international basis. Anything with little labour input will probably be ok in the long run, but I think you will see less and less of our vegetables and fruit being grown here. Our Aussie dollar doesn't help either of course.

 

Don't actually agree with the government bailing out struggling farmers, harsh as it may be, as it is usually only the most inefficient farmers that get any help, and all that happens is they struggle on for a few more years. Maybe with the financial problems overseas we will get a little less subsidy for farmers in the US and Europe, however I think we will always be on an unlevel playing field.

Have done quite well out of the ag sector by investing in support companies, unfortunately mainly when they get taken over.

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apologies to any professional educators out there...you know I'm just joshing)

===================

 

mate, i were read heaps of those "pros" articles, opinipons, along the way before i put my hands on this sector.

sadly none of them can make clear point that you just did. i think i searched hard enough and read plenty.

 

i just wish you can make more of these type of your "joshing".

got that funny feeling that you must be a teacher or something!! :laugh:

 

 

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  • 3 weeks later...

Do you think we should become bullish on Agriculture commodities and Agriculture stocks especially food and beverages stocks now? I think so. I saw following links on Agriculture commodities.

 

http://www.topstockanalysts.com/index.php/2013/05/10/the-sector-that-contrarian-investor-jim-rogers-is-most-optimistic-about/

 

The Sector That Contrarian Investor Jim Rogers Is MostOptimistic About

 

According to above link:

 

Rogers pointed to several factors hebelieves will push agricultural commodities prices much higher in the yearsahead.

 

One factor is demographics. Farmers acrossthe world are aging and it's not a sector attracting a lot of youngcareer-hunters

 

My ideas are not a recommendation to either buy or sell any security or currency.Please do your own research prior to making any investment decisions. Pleasenote that I do not endorse or take responsibility for material in the above hyper-linkeds site.

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  • 2 years later...

Looks like Australian Rural Capital - code ARC and now in a Trading Halt - is to hold 20% of the Kidman cattle properties

 

remaining 80 per cent will be held by Dakang Australia, according to a statement from parent Hunan Dakang Pasture Farming Co to the Shenzhen Stock Exchange.

 

The Shanghai Pengxin-controlled Hunan Dakang owns 51 per cent of Dakang Australia, while the other 49 per cent is owned by Gui Goujie's Shanghai Cred Real Estate. Chinese tycoon Mr Gui made waves in Australia last week with a deal to pump millions of dollars into the Port Adelaide Football Club.

 

Local entity ARC, which entered a trading halt on Tuesday morning, has yet to reveal its financial exposure, but it is likely to be on the hook for around $70m given the Chinese entities are set to pay close to $300m for an 80 per cent stake.

Cap raising for ARC, at the very least.

 

(and another reinvention .........

Previous codes used by this company

  • TDI changed to ARC
  • TCP changed to TDI
  • HBN changed to TCP
Other companies that have used the code 'ARC'

  • BREAKAWAY RESOURCES LIMITED - previously known as. .... AMALG RESOURCES NL..)
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