The most confident sectors are grain, cotton, beef and dairy (Image via Getty)
Australian farming stocks: Which sectors are feeling the most optimistic right now?
Food & Agriculture
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Delta lockdowns have failed put a dent in the confidence of the Australian farming sector.
The latest Rural Confidence Survey from Rabobank found that positive seasonal conditions and high commodity prices are continuing to benefit the sector even with temporary difficulties.
On an industry wide basis, over 90% of Australian farmers expect current conditions to either improve further over the next 12 months or continue as they are.
“While there are some challenges for the farm sector due to shipping delays and labour shortages, the Australian farm sector has largely been sheltered from the broader impacts of COVID-19 restrictions and is a shining star in the Australian economy right now,” Rabobank Australia CEO Peter Knoblanche said.
“Above-average rainfall in the late half of winter across many agricultural regions has set up the sector for another big spring, with prospects of a second year of high-yielding crops and excellent conditions for livestock.”
While Western Australian farmers were the most confident, all states had positive sentiment.
Even New South Wales had 48% of farmers optimistic about improved conditions, only narrowly behind WA with 52% – and this was actually higher than the prior quarter.
But there are some individual farming sectors more confident than others.
The most confident Australian farming sectors
Cotton and grain producers were the most confident.
One of the few cotton stocks is Namoi Cotton (ASX:NAM), a company that bore the brunt of the drought preceding COVID-19.
While its FY21 financial figures were still negative it has strengthened its balance sheet to prepare for the 2022 cotton season which it is tipping to be a bumper one.
The most prominant grain stock on the ASX is GrainCorp (ASX:GNC) and it is benefiting from heightened demand for grain as well as a bumper harvest.
It previously tipped an FY21 profit between $80 and $105 million but now expects between $125 and $140 million.
In early 2020, GrainCorp spun out its malt business United Malt Group (ASX:UMG) – malt being a grain used by brewers.
This company was hit by pubs being closed but things are turning around as venues reopen in the northern hemisphere.
It is tipping a profit between $36 and $41 million in FY21.
It’s good to be a farmer, even if the other end of the supply chain is struggling
Another Australian farming sector with solid outlooks was the dairy sector with 56% of producers optimistic current conditions will continue.
Many of these have struggled with the collapse in the daigou market and trade tensions with China.
The beef market saw 54% of beef producers expecting current conditions to continue with 39% predicting things will improve even further.
There’s only a handful of pure play beef companies – Wellard (ASX:WLD) and Australian Agricultural Company (ASX:AAC).
The former is an exporter while the latter runs beef farms.
Similar to the dairy sector, while it is positive to be a farmer, it wasn’t so much to be at the other end of the supply chain.
Wellard has been hit by COVID-19 restrictions as well as New Zealand’s suspension of the cattle export trade. But AAC reaped the benefits of higher prices, netting a $24.4 million operating profit.
