Farm Tender

Weekly Agribusiness News Recap

This article is bought to you by Entegra Sheds.

By Georgia Devenish - Agricultural Research Analyst at JLL.

Property
Northern Territory cattle property, 'Suplejack Station', has sold for $21 million at an unreserved auction conducted by JLL Agribusiness. JLL’s Geoff Warriner and Chris Holgar were appointed in May 2019 to sell 'Suplejack Station', a single pastoral lease spanning 381,700 hectares in the Northern Territory.

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Four bidders were registered to compete for the holding, of which 130,000 hectares is currently developed, leaving opportunity for considerable further development. The buyer was a company related to Robert Savage, a relative of the late Robert and Lilian Savage, who settled the property when it was granted as a pastoral lease in 1964.

Consolidated Pastoral Company (CPC) has sold 'Ucharonidge Station' for a reported $30 million. The 245,550 hectare property was acquired by Malcolm Harris' Cleveland Agriculture. In October last year, Cleveland Agriculture purchased 'Nockatunga Station' in Queensland, the first in a series of properties to be divested by the CPC's owner, Terra Firma. CPC chief executive, Troy Setter, told ABC Rural that 'Ucharonidge' would fit in well with Mr Harris' other cattle assets, "We used to use [Ucharonidge] to supply feeder and grower cattle down to Nockatunga Station in South West Queensland, and I would say that could be part of his strategy."

CPC has now sold or entered contracts to sell eight of its cattle stations, but the company owns a string of significant assets that are still on the market. Mr Setter said in a statement, "CPC still has one of the biggest pastoral holdings in Australia, comprising 3.5 million hectares of land across nine stations with a carrying capacity of some 300,000 head of cattle, plus two feedlots in Indonesia with nearly 30,000 head of capacity."

Contrary to the issues prevalent in the mainland dairy industry, Tasmania's highest value agricultural industry continues to grow. Tasmania's $429 million dairy industry has recorded consistent growth over the past decade, rebounding from difficulties in 2016 to set a record production of more than 910 million litres in 2017/2018, increasing value by 32 percent.

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Other growth areas include:
   * Beef, with farmgate value up 14 percent to $337 million;
   * Potatoes, up 11 per cent to $122 million;
   * Wool, up 8 per cent to $116 million; and
   * Fruit production, up from $92.7 million in 2013/2014 to $197 million in 2017/2018.

Overseas food exports continue to grow as well, up almost 8 percent from $686 million in 2015/16 to $740 million in 2017/2018.

According to Rural Bank’s annual Australian Farmland Values report, released yesterday, Australian farmland values have continued to grow, having increased by more than 10 percent last year. It marked the fifth successive year land values have climbed, with the national median price per hectare now at $4,645. Rural Bank chief executive, Alexandra Gartmann, said agriculture land overcame challenging seasonal and drought conditions along the eastern seaboard. “The figures show the remarkable strength and confidence in agriculture’s future, with all states experiencing growth of between 5 and 7.5 percent since 1998,” Ms Gartmann said.

Agribusiness
Robert Costa and fellow director in the goFARM agribusiness group, Liam Lenaghan, have reportedly raised $30.95 million of a prospective $100 million with the aim to purchase 28 dairy farms on the Murray Valley Katunga deep lead aquifer. The strategy is aimed at purchasing land and water assets at a discount compared with the Sunraysia or Riverland, and then developing almond orchards to meet "strong institutional demand for large-scale horticultural assets”.

The Australian Competition and Consumer Commission (ACCC) has raised preliminary concerns about the proposed takeover of Ruralco by Nutrien and is seeking more information and public submissions over the next fortnight before it makes a decision in August. Nutrien is the owner of Landmark and the ACCC is concerned the Landmark-Ruralco merger would significantly reduce competition in Australia’s rural supplies and merchandise sector. ACCC deputy chairman, Mick Keogh, said the merger would create “by far the largest retail and wholesale supplier of rural merchandise in Australia”, with Elders the only other large national chain.

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Woodward Foods, a Victorian lamb and beef processor, has sold a 49 percent minority shareholding in the business to Hairun Food Investment Holdings (HKH). HKH is a Hong Kong based company which owns and operates extensive logistics and cold store operations in mainland China. The deal will provide a capital base for Woodward Foods to expand both beef and sheepmeat production, targeted primarily at export into China.

The size of the investment was not disclosed, but reportedly a source close to the deal suggested Hairun’s 49 percent stake in the business was worth over $50 million. Company founder, Robert Woodward, told Beef Central Woodward and Hairun had started discussions over the deal three years ago, “to ensure that both companies shared a common vision and commitment to achieve the long-term growth objectives of Woodward Foods.”

New England-based farm software service companies, Practical Systems and Outcross have entered into a joint venture to take ownership of Livestock Exchange, Australia's largest livestock traceability system. Livestock Exchange is the major supplier of NLIS software technology with more than 90 percent of livestock selling centres in Australia using Livestock Exchange software to process their sales. Livestock Exchange had been owned by farm services company, Landmark, for the past three years.

Access to quality data and the availability of agricultural assets at a "material scale" has created challenges for institutional investors looking to invest in the Australian agricultural sector. Speaking on a panel discussion at the Agri Investor conference in Melbourne yesterday, Brent Snow, a portfolio manager at industry super fund First State Super, said the fund had no dedicated allocation to agriculture because it was hard to get exposure to the agri asset class at a "material scale". Instead, agricultural investments are included in First State's 6 percent allocation to infrastructure.

Simon Mather, head of investments at $5 billion industry super fund BUSSQ, highlighted the issue of access to quality data as a significant challenge to investing in agricultural assets. If the fund sourced an opportunity but could not get comfortable with the data and the governance around it, "it means we just can't move forward with the deal," Mather said. BUSSQ has approximately a 3 percent allocation to agricultural assets..

Horticulture
Pear and apple production has suffered in Victoria as the dry growing season bites into yields and overall volumes. Fruit Growers Victoria grower services manager, Michael Crisera, said Packham pear yields were down about 60 percent, while overall pear volumes were down 40 per cent compared to last year. Goulburn Valley apple grower, Clarke Rutherford, who finished harvest last week, said his yield was one-third lower than last year.

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Cropping
Cotton Australia chief executive, Adam Kay, has estimated that the next cotton season could yield as low as one million bales if there are no significant inflows into irrigation dams over the next five months. A recent Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Australian crop report put the current season projections at 2.1 million bales, with production down 54 percent on last year.

The recent ABARES crop report estimated the rice industry suffered a 91 percent decline in production last season reflecting a 90 percent drop in area planted. Rice production fell to an estimated 52,000 tonnes in the Murray Valley and Murrumbidgee Irrigation Area due to low water allocations. Despite the significant drop in production, SunRice said overall rice yields have increased above the five-year average.

Wool
The AWEX Eastern Market Indicator (EMI) has fallen to 1,768 cents a kilogram, its lowest point since November 14, 2018. The global economy has been blamed for the weakening market. The US-China trade war is impacting on demand globally. While woollen garments from China are not impacted by US tariffs, consumer confidence is still very weak.

The Weekly Times has reported that the NZ Merino Company (NZM) is buying unprecedented amounts of wool from Australia, through contracts and at auction. Demand for the company’s accredited and “ethically produced” wool is outstripping New Zealand growers’ ability to meet demand. This has largely been driven by demand from the brands it supplies, such as Icebreaker and Allbirds. Allbirds is a start-up company recently valued at $1.4 billion just four years after it started selling wool shoes.

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NZM is increasingly looking to Australia and South Africa for non-mulesed wool. NZM chief executive, John Brakenridge, said booming global demand for ethically produced wool meant supply was “soaked up seasons in advance” and demand could no longer be met by “NZ’s current production base”. “NZM are partnering with AWN [Australian Wool Network] in Australia to sign keen Australian growers into long-term supply contracts,” Mr Brakenridge said.