Agri sector starts new year on a positive
20 January 2009
Australia’s listed agribusiness sector has had a positive start to the new year, with data showing an up-tick in performance over the past month.
The January Commonwealth Bank Agri Indicators recorded an increase for the agri sector of 7.8 per cent. This result was stronger than the broader S&P/ASX200 which experienced an increase of 4.4 per cent during the month.
Looking at the year ahead, the consensus outlook throughout 2009 also looks good at 16 per cent against the S&P/ASX200 at 10 per cent. This is an optimistic view for agribusiness for the start of the year. However, many consensus analysts are likely to be waiting for results to be announced in the February reporting season to form a clearer picture as to what the year may hold.
Dale Champion, Acting Executive General Manager, Commonwealth Bank Agribusiness, said: “The recovery in the listed agribusiness sector over the past month is good news to start off the year. With the February reporting season coming up it is certain to provide an interesting time.”
The January Commonwealth Bank Agri Indicators data again reiterates the importance of the longer-term outlook. Despite exuberance being up from recent lows, the sector remains significantly under-priced. It will take some time for a full recovery. In addition, forecast volatility for the next 12 months is at 28 per cent so while there may be potential buying opportunities in agri stocks, it is still a cautionary tale.
At the farmgate, harvest has been disappointing for many.
“Whilst the recent harvest originally promised so much, it is disappointing to see so many impacted by unseasonal late rains that have adversely impacted final values and individual outcomes,” said Mr Champion.
In the North, the recent weather has been positive and conditions are favourable. The cyclone and flooding activity does auger well for a good wet for northern producers of cattle, particularly with many regions that have been suffering drought conditions finally seeing some solid early rain.
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Notes to editors:
i. About the Commonwealth Bank Agri Indicators Report
The Commonwealth Bank Agri Indicators is created around three 12 month forecasting models – Fundamental Return (consensus forecasts of earning and dividends for individual stocks in the sector), Exuberance (proprietary measure of market mis-pricing), and Volatility (derived from proprietary methods of modelling realised volatilities, detecting changes in long-run levels and correcting for switchbacks and other correlation patterns in the data).
The Commonwealth Bank Agribusiness index measures the performance of the Commonwealth Bank defined ‘Agribusiness’ sector over time. The Commonwealth Bank Agribusiness sector currently consists of 16 rural-dependent companies: Australian Agricultural Company Limited (AAC), ABB Grain Limited (ABB), AWB Limited (AWB), Futuris Corporation Limited (FCL), Forest Enterprises Australia Limited (FEA), GrainCorp Limited (GNC), Gunns Limited (GNS), Great Southern Limited (GTP), Incitec Pivot Limited (IPL), Nufarm Limited (NUF), Primeag Australia Limited (PAG), Ruralco Holdings Limited (RHL), Ridley Corporation Limited (RIC), Select Harvests Limited (SHV), Tassal Group Limited (TGR), Timbercorp Limited (TIM). Companies previously included in the sector but since removed due to delisting or exiting the All Ordinaries index include Queensland Cotton Holdings Limited (QCH) and Auspine Limited (ANE).
The Commonwealth Bank Agribusiness index is a non-float adjusted, market-cap weighted index constructed using the same methodology as the S&P index series. To be considered for inclusion in the index, each stock must be a in the All Ordinaries index. The Commonwealth Bank Agribusiness index begins on 3 April 2000 which is the same date as the launch of the S&P/ASX index series in Australia. At inception there were 8 stocks included in the index. This number is currently 16.
The Commonwealth Bank Agri Indicators should be used as a guide only to the performance of the Agribusiness sector, as a way to measure its performance and potential return over the coming months and year.
This report has been prepared without taking account the objectives, financial situation or needs of any particular individual. For this reason, any individual should, before acting on the information in this report, consider the appropriateness of the information, having regard to the individual's objectives, financial situation and needs and, if necessary, seek appropriate professional advice. Past performance is not a reliable indicator of future performance. Commonwealth Bank of Australia ABN 48 123 123 124, AFSL 234945. A full copy of the Agri Indicators Report can be obtained by contacting our AgriLine on 1300 245 463 7am to 7pm (AEST time), Monday to Friday.
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