The Nufarm Ltd (ASX: NUF) share price is rallying higher today. At the time of writing, the Nufarm share price was trading at $5.24, up 7.6%. Despite the strong rise in crop protection and seed producers’ share price, no news is out from the company today.
However, macro conditions for the agricultural sector continue their favourable trend. This is supported by government data and information posted recently.
More money in the pockets of farmers
Today, the lift in the Nufarm share price appears to be centred around the stellar season for farmers.
Yesterday, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) noted that the average income from farming is expected to jump 18% to $184,000.
I come from a farming background myself. So it is a great feeling to see hard work and honest living being rewarded. Especially after a challenging year.
The ABARES 20201 outlook cited a record winter crop in NSW, after years of poor conditions. Furthermore, dairy farm income is projected to increase by 2%. Lower feeding costs will assist this.
How does all this influence Nufarm? Well, if there are good conditions for crops, and farmers have the money, it’s possible it will be spent on products to protect those crops. Also, if the weather permits, farmers will be buying more seeds to grow their next season of crops.
Nufarm’s share price rebuilding alongside the company
It has been a challenging 12-18 months for Nufarm and its share price. The weather abides by no one and it certainly wasn’t favourable not too long ago. Dry seasons throughout the various locations in which Nufarm operates heavily impacted the business.
Unfortunately, when the rain started coming down, COVID-19 was ramping up. The supply chain impacts of this event meant the company couldn’t meet the demand.
Since then, supply chains have settled and Nufarm has benefitted from the demand. In an update in February, the company reported revenue growth of 46% on the prior 4 months in the Asia Pacific Region. Other operational regions also fared reasonably well with growth.
The Nufarm share price has managed to recover 21% in the last 6 months during the optimal conditions. This places the 12 month gain in share price at 2.4%.
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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