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Could Aussie beef be the next big ASX growth sector?

livestock, cows, agriculture, beef

According to an article from Bloomberg, demand out of China for Aussie beef is set to surge in the coming years, with predictions that current export levels to our major trading partner could more than triple.

So, what’s driving this projected demand and how could you cash in on the ASX in 2019?

What are the tailwinds for Aussie agriculture?

According to the article, research from Rabobank Group suggests Australia could triple its exports of grain-fed beef to China by 2030 to “satisfy the nation’s growing appetite for the highly marbled meat”.

The Dutch-based agribusiness bank said that rising consumption in Asia could be the catalyst for increasing Australian grain-fed beef by 65% in the next decade or so.

Australia presently exports around 50,000 tons of the meat to China, but this could be set to quadruple to nearly 200,000 tons if demand unfolds as the bank has projected.

According to senior analysts, China’s demand for beef will keep expanding and with little projected increase in its own beef-growing capacity, imports will play an even larger role in the near future.

The article suggested that consumers in Asian markets have a strong affinity with highly marbled, grain-fed beef as it suits their palate and cuisine, based on Rabobank’s report.

Projections suggest that grain-fed beef could make up 20% of China’s beef imports by 2030, versus just 6% now, which represents a strong market opportunity for some of Australia’s largest beef producers.

How could you invest ahead of a potential boom?

While the findings are certainly of interest to keen-eyed Fools, the assumptions used in Rabobank’s analysis around demand, per capita income and even trade concerns all require careful consideration before investing.

For those speculators out there, I think one of the best agricultural options on the ASX at the moment may be Australian Agricultural Company Ltd (ASX: AAC).

The Aussie company owns and operates feedlots and farms covering 7 million hectares in northern Australia and has significant cattle and beef operations. The AAC share price has edged marginally lower in 2019 and is currently trading at $1.04 per share, with a market cap of $627 million putting it firmly in the small-cap category.

While I’m not personally into the speculating game, preferring to look at the likes of Telstra Corporation Ltd (ASX: TLS) or similar blue chips, it’s clear there is the potential for a rebound in Aussie beef if the Chinese demand plays out as Rabobank anticipates.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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