Latte with Ray: Agriculture Investments
By Raymond Chan
Latte with Ray would like to talk about agriculture investments this month.
In late March, we attended the Global Food Forum in Melbourne. It’s a conference where everyone in the Agricultural and Food industry gets together to hear from high-quality speakers including Andrew Pratt and Gina Rinehart.
The listed companies which spoke included Woolworths (WOW), a2 Milk Company (A2M), Blackmores (BKL), Ingham’s Group (ING), Bega Cheese (BGA), Fonterra Shareholders' Fund (FSF) and Costa Group (CGC).
This year, there was record attendance with 421 participants. The mood of the event was one of excitement and confidence in the industry’s future.
The conference reinforced to us that the sector is in good shape and investment demand has never been stronger.
Our analyst Belinda Moore summarised the key themes and issues presented at the conference:
- Golden era for agriculture and the Dining Boom.
- The important role Australian agriculture plays in our economy.
- Benefits of the Free Trade Agreements (FTA) that will reduce tariffs overtime, and increase Australia’s competitive position.
- China’s commitment to e-commerce and the Free Trade Zones (FTZ).
- Australia’s position as a clean, green, quality and importantly, safe producer.
- The issue of provenance – consumers are questioning - more than ever - where their food comes from.
- Animal welfare is also a key consumer concern – e.g. demand for free range.
- Need to reduce food waste.
- Food producers need a strong brand so they aren’t competing at the commodity end, and the need for differentiation is extremely important.
- Strong demand for health foods and organics – the supermarkets are increasingly looking to expand in this area to achieve sales growth.
- Producers and food companies are a beneficiary of Amazon Fresh coming to Australia as a new customer. It will reduce the power of the major supermarkets or pharmacy chains.
- Farming smarter – The Ag-Tech Revolution. Farmers need to apply technology to improve yields and productivity and to make Australian agriculture more competitive.
- Tax cuts are required to make Australia more globally competitive, however, they need to be reinvested back into growth.
- More foreign investment is required, but don’t be scared of Chinese investment.
- Dairy industry will survive and prosper in the future, despite last year’s events.
- Negative implications of rising gas and energy prices will eventually need to be passed onto the consumer, as efficiency initiatives won’t fully offset them.
Published: Wednesday, April 19, 2017
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