Australian agriculture is set to boom.
It should come as no surprise to enterprising investors, who've long been told Australia is to become the 'food bowl of Asia'.
Fuelled by unprecedented growth in its middle-class population, rising prosperity and globalisation; Asia's demand for consumables will grow for decades to come.
In a note to clients, Phillip Capital Private Wealth Advisor, Matthew Litchfield, recently highlighted the latest research from the CSIRO and Rural Industries Research and Development Corporation (RIRDC) which identified five megatrends in Australian agriculture over the next 15 to 20 years.
The key megatrends identified by the research include:
- A hungrier world – by 2050, another 2.3 billion to 2.4 billion people will call the world home and demand 60% to 70% more food than is currently available.
- A wealthier world – by 2060, one billion people are expected to rise from poverty, with beef and dairy consumption forecast to jump 120% and 100%, respectively.
- Fussier customers – by 2050, consumers will want food that is healthy, green and ethically produced.
- Transformative technologies – farming, science, logistics and technology will intertwine and result in advanced supply chains, genetic science, sensory systems and data analytics.
- Bumpier ride – farmers are expected to encounter deeper shocks, associated with climate change, environmental change and globalisation.
"While the projected increases in global demand for food could be perceived as an insurmountable challenge, our farmers, who supply 93 per cent of our domestic food needs and are highly export oriented, are renowned for their capacity to adapt, innovate, achieve productivity gains despite declining terms of trade, and respond strongly to risks," Managing Director of RIRDC, Craig Burns, said. "They are well-placed to address and capitalise on these megatrends."
Some tasty opportunities for Aussie investors
So far in 2015, we've seen many Australian companies, which play into the five megatrends above, soar in value.
- Bellamy's Australia Ltd (ASX: BAL) – up 370%
- Blackmores Limited (ASX: BKL) – up 330%
- Capilano Honey Ltd (ASX: CZZ) – up 210%
- Select Harvests Ltd (ASX: SHV) – up 72%
However, while each of these companies may have bright futures ahead, arguably, the time to buy their shares has well and truly passed by.
Fortunately, with no shortage of agriculture stocks listed on the ASX, there're plenty of other businesses that may be worthy of running the ruler over, including:
- Graincorp Ltd (ASX: GNC) – A leading agribusiness with assets in grains and oilseed supply
- Bega Cheese Ltd (ASX: BGA) – An iconic cheese company located in the Bega Valley.
- A2 Milk FPO NZ (ASX: A2M) – A dairy company that sells milk containing only the A2 protein.
- Ruralco Holdings Ltd (ASX: RHL) – A diversified agribusiness with 40 specialist businesses.
- Tassal Group Limited (ASX: TGR) – A pioneering salmon producer seeking a vertically integrated domestic supply business.
- Webster Ltd (ASX: WBA) – A walnut producer and marketer of onions.
- Fonterra Shareholders' Fund (ASX: FSF) – A cooperative owned by 13,000 New Zealand farmers, making dairy products available in 140 countries.
- Australian Agricultural Company Ltd (ASX: AAC) – A cattle company and beef producer.
That's just a few of the leading businesses that stand to benefit from the ultra-long-term demand growth expected to hit Australian shores in coming decades.
While the risks are evident, and shares will be volatile at times, if you can identify well-run businesses with a view to the long term, the stage certainly appears set for some great investments to be made in Australia's agriculture sector.
