With investment in the resources sector slowing more rapidly than previously expected investors are looking for new ways to leverage off the Australian land of plenty. Agriculture looks a likely winner, with the world's population expected to grow by more than 2 billion people by 2030 and Australia's population forecast to grow by 10% in just the next five years. That makes it one of the fastest-growing and wealthiest populations on the planet.
One company capable of a culinary cash-in is Tasmanian-based producer and marketer of salmon, Tassal Group (ASX: TGR). Its market value has more than doubled in the last year as acquisitions of rivals and fast-growing profits take effect.
Global demand for salmon outstrips supply and its core domestic market has generated growing sales and margins thanks to effective marketing and a growing product mix. Fresh, smoked and tinned salmon are among its offerings, with a net profit of $33 million in financial-year 2013. The total dividend payout was also up over 18% on the prior year and the group's long-term growth prospects look good.
Population growth is most rapid in Asia where demand for the standard trappings of a middle-class lifestyle and diet continues to evolve. That means dairy products and the world's largest exporter of them, Fonterra (ASX: FSF), looks perfectly positioned to keep delivering dairy nutrition to the world. It's the export of milk powders to Asia that has particular potential, as rising incomes and urbanization increases demand in countries like China. Bottom-line profit in financial year 2013 was NZ$736 million, up 18% on the prior year despite unusually poor climatic conditions in New Zealand.
With a dining boom comes a wining boom and Treasury Wine Estates (ASX: TWE) has the advantages of rapidly rising demand for wine in Asia and a globally recognised brand portfolio. Iconic brands include Wolf Blass, Lindeman's and Penfolds. In Asia the high-end market for wines is growing particularly quickly as the luxury brand cult — the luxeplosion — continues to rocket across the region.
The company recently had to write down $160 million due to excess inventory with its U.S distributors and is facing legal proceedings as a consequence. With the share price punished the group is looking to move on having dumped chief executive David Dearie and strategically reassessed its strategy in the price sensitive U.S market. A falling dollar should benefit the group this financial year and with the price premium gone but brand strength remaining now seems a good time for long-term investors to consider the company.
Foolish takeaway
As globalisation takes hold diets in the east are westernised and those in the west diversified. Rising incomes and changing consumer demand mean Australian agriculture could become a boom industry with these companies worth dining out on.
