This Australian industry is forecast to see record profits this year. Here’s what S&P/ASX 200 Index (ASX: XJO) shares investors might want to keep an eye on over the coming year.
Could these be the next ASX 200 sector to boom?
Companies involved in Australia’s agriculture industry might be preparing to receive record profits in the near future, with the sector’s profits expected to surpass $70 billion for the first time.
The federal government’s Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) has just updated its forecast for 2021/22, predicting the agriculture sector is in for a record-breaking year.
Australian farmers are having a fantastic year on the land. Particularly, as seasonal conditions and rainfall have turned out better than expected.
While Australia’s agriculture sector is enjoying a bumper year, its international competitors are struggling. Much of the northern hemisphere saw below average rainfall and warmer weather over the 3 months ended 31 July.
ABARES expects the weather above the equator to have increased the prices of agricultural commodities to Australia’s benefit.
In fact, the body expects the value of Australia’s crop exports to increase by 17% to $30 billion in 2021/22. Further, ABARES believes the country’s canola exports’ value will increase by 50%.
Additionally, the global recovery from COVID-19 has brought increased demand for travel and retail, which in turn will likely increase demand for fibres, oilseeds, and sugar.
The increasing demand and great year for Australian farmers might leave some market watchers wondering how to get a slice of the action.
Here are 3 ASX 200 shares that could be about to benefit from Australian agriculture’s record-breaking year.
2 ASX 200 shares involved in the agriculture sector
GrainCorp Ltd (ASX: GNC)
Investors might want to keep an eye on GrainCorp in the near future.
The company operates the largest grain storage and handling network on Australia’s eastern coast. GrainCorp also operates 7 bulk port terminals to help get Australian grain out to international markets.
It also produces canola oil and meal, and cattle and livestock feed.
ABARES has predicted that much of GrainCorp’s business will see a boost in 2021/22.
Elders Ltd (ASX: ELD)
Elders’ business model is splashed across most of Australia’s agriculture sector. It has business in farm and rural insurance, property sales, market reporting, and commodity exchanges.
The company also sells a multitude of farming equipment and provides professional services to farmers.
It’s relatively safe to say that what’s good for the agriculture sector, is also good for Elders.