Why GrainCorp (ASX:GNC) has surged 19% in the last 3 months

Despite China's tariff increases, the GrainCorp share price has climbed 19% in the last 3 months. Here's why.

| More on:
asx rural real estate shares represented by green up trending arrow sitting in a field of green crops

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

GrainCorp Limited (ASX: GNC) is one ASX-listed agriculture share that has been in the firing line of China's 80% import tariff on Australian barley.

As Motley Fool has previously reported, the tariffs were imposed after China claimed that Australia used the illegal practice of dumping. A claim vigorously denied by Australia.

Despite the loss of a major part of its market, the GrainCorp share price has enjoyed a bit of a renaissance of late, rising 19% in the last 3 months. We explore the possible reasons. 

GrainCorp succeeds in finding markets outside China 

In May, GrainCorp reported revenue of $2,63.5 million for the  half-year ending 31 March, delivering a 30.8% increase on the prior corresponding period. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations grew to $140 million. 

For several years, GrainCorp has made it a priority to focus on other markets, not just as a response to the barley tariffs but because it equated to good business.

In an interview with the Australian Financial Review, GrainCorp managing director Robert Spurway said: 

What we have seen is that Australian grain remains competitively priced in most destination markets and that has created opportunities and, as a result of the tariffs, as you always do with tariffs when they are applied, a bit of disruption and dislocation to global trade but the underlying demand remains there.

Crop forecast to hit peak in June

A report out of Bell and Porter last month pointed to the June Australian Bureau of Agricultural and Resource Economics crop report. It highlighted an east coast winter crop forecast of 22.1 megatonnes (mt), the highest June forecast ever and above last year's previous high of 21.5mt. 

Further, Bell and Porter added that the "current soil moisture profiles, the three-month rainfall outlook and grain futures pricing, all look supportive of another above-average crop size and trading margin outcome for GNC". 

Despite the positive forecast, Bell and Porter downgraded the GrainCorp share price from buy to hold, Analysts cited the main reason for the downgrade being the high likelihood that a seasonal peak in earnings was close to being reached.

Meanwhile, GrainCorp's earnings guidance upgrade reflected strong margins due to high global demand for Australian grain and oilseeds. The turnaround demonstrates that exporters can succeed in finding markets outside China.

The GrainCorp share price is trading at $5.19 up 0.48%, at the time of writing.

Motley Fool contributor Frank Tzimas 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.

More on Share Gainers

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

3 ASX All Ords shares up 50%+ in March

These ASX shares have been on fire this month. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher

These shares are having a good session on hump day. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was back to earth for ASX shares this Tuesday.

Read more »

Two happy scientists analysing test results.
Healthcare Shares

Mesoblast share price rockets 36% on breaking FDA news

ASX investors are sending the Mesoblast share price soaring following promising FDA news.

Read more »