Good news for Australian Farmers as Agribusiness records another top month
Tuesday, 23 June, 2009: Furthergood news for Australian farmers as the listed agribusiness sector recorded its third consecutive month in positive territory, according to recently-released data by the Commonwealth Bank.
The June Commonwealth Bank Agri Indicators Report revealed the Agri Index rallied returning 19.1 per cent over the past three months. During the past month, the sector delivered a total return of 1.0 per cent, its third consecutive month of positive performance.
Brendan White, Executive General Manager, Commonwealth Bank Regional & Agribusiness Banking said although ongoing uncertainty on world financial markets has implications for the entire global economy, the agribusiness sector as a whole has a number of positive factors in its favour and an optimistic long-term outlook.
“The performance of the Agri Index this month once again highlights the resilience of the sector in these challenging economic conditions,” he said.
After the departure of Great Southern Limited and Timbercorp Limited from the Agri Index, it continued to deliver a positive result due to the strong performance of AWB Limited, ABB Grain Limited and Incitec Pivot Limited.
“In addition, the outlook for many Australian farmers remains positive as a number of favourable opportunities continue to emerge for agribusiness.”
Average farm cash incomes for beef properties in northern and southern Australia are projected to increase by nearly 50 per cent and 60 per cent respectively in 2008-09, according to a new Australian Bureau of Agricultural Research and Economics’ report.
“The 2009/2010 Australian wheat crop forecast at 22mt is up slightly from last year and above the prior seven year average of 19.5mt. This increase in wheat production is expected to be associated with an increase in exports,” Mr White said.
“Improved yields in Southern New South Wales, Victoria and South Australia is also seen supporting production.
“These factors, together with this month’s Agri Index, point to a more promising outlook for Australian farmers and investors in the agribusiness sector.”
Mr White also commented that seasonal conditions for farmers across the country, while varied, remain generally favourable.
“Seasonal conditions and general weather patterns in the majority of regions in South Australia, Western Victoria, Central to Northern New South Wales and Southern Queensland have proved favourable” he said.
“Some areas of Western Australia, Southern New South Wales and Northern Victoria have had low autumn rain, however late May and early June falls significantly improved the situation and allowed planting to progress.”
On a risk adjusted basis, the listed Agribusiness sector is broadly in line with expectations for Consumer Staples and Financials sectors. Forecast volatility remains high for the sector, at 29 per cent for the next 12 months, signalling to investors to remain cautious in the near term.
“The June Agri Indicators Report confirms that while the market will remain volatile the listed agribusiness sector is weathering the challenges of the Global Financial Crisis. Although this may present strong buying opportunities, investors entering the market in the coming weeks should do so cautiously,” Mr White added.
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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 14 rural-dependent companies: Australian Agricultural Company Limited (AAC), ABB Grain Limited (ABB), AWB Limited (AWB), Elders Limited (ELD), Forest Enterprises Australia Limited (FEA), GrainCorp Limited (GNC), Gunns Limited (GNS), 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). Companies previously included in the
sector but since removed due to delisting or exiting the All Ordinaries index include Queensland Cotton Holdings Limited (QCH), Auspine Limited (ANE), Great Southern Limited (GTP) and Timbercorp Limited (TIM).
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 14.
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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