Weekly Agri News Recap

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By Georgia Devenish - Agricultural Research Analyst at JLL

Costa Group has announced the closure of its mushroom farm operating at Spreyton in Tasmania effective 8 November 2019. Higher costs and reliance on aging technology were cited as driving factors for the closure. The 50 year old operation was one of two farms targeted in a recent review of Costa's mushroom farm footprint as the company looks to focus on the development of a 'state-of-the-art' mushroom operation in Adelaide. The closure is expected to impact up to 56 jobs.

Costa Group shares initially tumbled 25 percent on opening yesterday after being suspended from trading on the ASX for more than a week. In an announcement on 28 October the company issued a new earning guidance for the 2019 calendar year. This follows the fourth profit downgrade in a little over a year as Costa Group deals with drought and oversupply in some of its key products. The company announced it would raise approximately $176 million in equity, offering shareholders one share for every four they own at $2.20, reflecting a 36 percent discount to Costa's last share price on October 21.

Rural Funds Group (RFF) is exiting the poultry industry as it moves to expand its presence in Australia's beef and macadamia industries. The company's portfolio of 17 broiler farms in the New South Wales Riverina and at Lethbridge in Victoria will be acquired by ProTen, a specialist developer and operator of broiler farms. As the company announced the divestment of the poultry assets, it also reported a $22.6 million purchase of three cattle properties in Western Australia from Pilbara pastoralist and businessman, Brent Smoothy. The move represents the Real Estate Investment Trusts' first exposure to Western Australian land. The cattle properties, 'Petro', 'High Hill' and 'Willara', comprising approximately 6,000 hectares will be leased to Wagyu beef business, Stone Axe Pastoral.

Bega Cheese has announced adjusted expectations for full-year earnings for FY20 of between $95 million and $105 million, representing a drop of up to 17.4 percent year-on-year. Lower demand for its unbranded products and higher milk prices amid unprecedented competition for drought-affected supply were cited as key factors in the re-evaluation of the company's position. Bega Cheese chairman, Max Roberts, said the conditions that contributed to last year's 59 percent fall in full-year profit had continued into FY20 "but at a faster and deeper rate".

Namoi Cotton is also feeling the heat of the drought with the cotton processing business reporting a $4 million after-tax loss for the first half of FY20. The significance is evident in comparison to the $14.3 million profit posted from the same period to August 31 in FY19. Driving the fall in profits was the 60 percent, or 677,500 bales, decrease in ginning volumes which nearly halved the company's revenue. Namoi warned ginning volumes in the first half of next financial year would likely fall a further 66 percent on its already flat figures from the start of 2019/20.

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Saputo has completed the acquisition of Lion Dairy & Drinks' specialty cheese business within weeks of approval from the Australian Competition and Consumer Commission (ACCC). The ACCC cleared the $280 million acquisition in September saying that after consultation with "many farmers and other interested parties" it did not think the deal would substantially lessen competition. The deal involves iconic brands such as 'South Cape', 'Tasmanian Heritage', 'Mersey Valley' and 'King Island Dairy' and manufacturing facilities in Burnie and King Island.

Thames Pastoral is selling 'Tanumbirini' and 'Forrest Hill' stations in the Northern Territory. The two large-scale beef assets cover 559,370 hectares near Daly Waters, south-east of Darwin. The operation is said to have consistently carried an average of approximately 37,500 cattle. 'Tanumbirini' and 'Forrest Hill' will be auctioned online by JLL Agribusiness and Colliers International on December 9.

The Australian wine industry continues to go from strength-to-strength reporting a seven percent increase in the value of Australian wine exports to $2.89 million for the year to 30 September 2019. The average value of bottled exports saw impressive growth to reach a record $6.79 per litre. While value was going up, export volumes actually decreased eight percent to 774 million litres suggesting that the total increase in value could be up to 16 percent to $3.74 per litre, the highest level since 2009. Wine Australia Chief Executive Officer, Andreas Clark, furthermore made note of the fact that, "Australian wine exports to China (including Hong Kong and Macau) reached a record value of $1.25 billion, an increase of 18 percent, with average value increasing by 40 percent to $8.42 per litre FOB [Free On Board]."

Tasmanian exports have grown 34.1 percent over the past five years. Export figures show $3.71 billion worth of products was exported from the state in the year to August 2019. The proportion of value attributed to agricultural exports is now worth $740 million per annum. Data from the latest Agri-Food Scorecard highlighted the Tasmania's agriculture sector had increased in value to $2.67 billion, a 10.6 percent increase. Dairy contributes a significant amount to total value with a farmgate value of $429 million per annum. As does seafood, the value of which increased by 12.8 percent to $1.07 billion.

Construction of a new freight hub at the Darwin Airport in the Northern Territory is set to begin with completion of the project expected in August 2020. The 6,000 square metre facility will feature both dry-story and cold storage as well as the Northern Territory's first vapour heat treatment plant. It will be an open-access facility where any producer can use the services on offer. It's anticipated that sensitive and high-value products, such as melons and mangoes, as well as some highly sought-after Indigenous fruits, will be the main produce exported through the facility.

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