The Motley Fool

Aussie investors miss food boat

Graincorp (ASX:GNC) director Donald McGauchie says Australian investors have missed the boat on the agricultural boom and sold off their birthright.

Speaking at a business lunch on Wednesday, Mr McGauchie said foreign investors had jumped on board faster than Australians, to take advantage of the coming boom in food demand from Asia. “I think the Australian investment community is going to wake up very shortly and realise they have given away their birthright that they had in their hands and could have bought cheap,” he said.

Graincorp is itself the subject of a takeover offer from US agricultural firm Archer Daniels Midland, one of the world’s largest agriculture-based companies. That follows the takeovers of ABB Grain Ltd, and AWB (Australian Wheat Board) Limited, in recent years.

With the world’s population expected to hit 9 billion people by 2050, the demand for food is set to rise dramatically, providing big opportunities in farming and food production for those companies willing to position themselves now.

In Mr McGaunchie’s speech, he noted that Australia could double food production in the next 20 years and take a large slice of the increased demand for high-quality food. Asia’s middle class is growing and so is their demand for quality foodstuffs. But Mr McGauchie, who is also chairman of fertiliser company Nufarm Limited (ASX:NUF) and Australian Agricultural Company (ASX:AAC), noted that Australia is one of the most expensive places to process meat or horticulture.

Australia needs to invest heavily in infrastructure, and sign free trade agreements with key Asian countries to compete effectively. The US and New Zealand already have free trade agreements with China, South Korea and Japan, out-competing us.

Foolish takeaway

As Mr McGauchie said, “Asia’s century can become Australia’s agricultural century as well, but first we need to shift gears.”  Investors looking to invest in agricultural companies might want to consider dairy companies Bega Cheese Limited (ASX:BGA) or Warnambool Cheese and Butter Factory (ASX:WCB).

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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