A criticism sometimes levelled at Australian investors is their failure to take a global perspective. While I don’t agree with this generalisation, when it comes to our perception of the value of agricultural businesses (agribusinesses) we arguably have been left wanting.
There have been numerous recent instances where overseas investors have taken a much more bullish view on the value of our agricultural assets. Grain assets have certainly been one of the prized areas with both ABB and AWB sold to foreign interests, while Graincorp Ltd (ASX: GNC) remains listed after the government rejected ADM’s $3 billion bid, it is arguably still a target.
Dairy also has had its profile raised after the bidding war and acquisition of Warrnambool Cheese and Butter Factory by Canadian dairy giant Saputo.
Here are three companies for those keen to gain exposure to the “Asian Century” as it has been dubbed.
Bega Cheese Ltd (ASX: BGA) – While there has now been a re-rating of the dairy sector thanks to Warrnambool, the long-term demand for dairy products and increased protein consumption in Asia appears very real and Bega is well positioned to benefit and snare its share of that growth.
Australian Agricultural Company Ltd (ASX: AAC) – Like dairy, exports of beef to Asia are growing strongly. This situation has even attracted the attention of Andrew Forrest, the founder of iron ore miner Fortescue Metals Group Limited (ASX: FMG) who is investing privately in the beef industry. AACo is Australia’s oldest continuously operating company, having been established in 1824 and owns Australia’s largest beef herd. The company will soon complete the building of an abattoir in Darwin which will create a vertically integrated company with an export window into the Asian region – an exciting prospect for shareholders.
Nufarm Limited (ASX: NUF) – The increased volume of agricultural production will require increased use of herbicides and pesticides. Nufarm is a major supplier of these agricultural inputs with distribution across the country. While the company has been struggling in recent years, assuming it is now on top of its problems then the future should be much brighter for Nufarm.
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Returns as of 6th October 2020
Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
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