Weekly Agribusiness News Recap

This article is bought to you by Macarthur Stockfeed and Rural Supplies. 

By Georgia Devenish - Agricultural Research Analyst at JLL. 

Agribusiness

Australasian fresh produce company, Seeka, has told shareholders it is considering the sale and leaseback of a portion - or all - of its orchard portfolio in Australia. The move comes as as the company endeavours to repay debt while accelerating it's kiwifruit orchard development program. Located in Victoria's Goulburn Valley, the portfolio includes approximately 273 hectares of orchards and approximately 278 hectares of land available for new development. Seeka acquired the orchard portfolio from Bunbartha Fruit Packers in 2015 for $22 million.

Fonterra Co-operative Group has plans to reduce its 18.8 percent stake in Chinese dairy company Beingmate Baby & Child Food Company Ltd. Miles Hurrell, Fonterra's chief executive, said the decision was part of the company's three-point plan to reduce debt by $NZ800 million. Fonterra acquired the stake in Beingmate in March 2015 for 3,464 million RMB (then valued at $NZ748 million) when the Chinese company's share price was 18 RMB per share. Given today's price of 5.02 RMB per share, the Beingmate stake is now valued at 966 million RMB or approximately $NZ209 million.

Beingmate has recently been in the news in relation to the announcement in March 2019 of the establishment of a new joint venture between ASX-listed goats milk formula maker Bubs with the Chinese dairy and infant nutrition company.

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Macquarie Agriculture, an agricultural fund managed by Macquarie Infrastructure and Real Assets (MIRA), has acquired a 49 percent stake in 'Cubbie Station'. Chinese textile giant, Shandong Ruyi and Macquarie Agriculture, announced their joint ownership agreement of 'Cubbie Station' and associated assets, including its cotton gin, late last week. Ruyi will retain a 51 percent stake while Cubbie Agriculture, a subsidiary of Ruyi, will continue to operate the station under a long-term operating agreement.

The partners have also entered into a binding commitment to voluntarily contribute water to the Culgoa River and Lower Balonne intersecting streams when water is most needed. The commitment will include voluntary contributions of up to 10 gigalitres to the Lower Balonne over a five-day period following extended dry periods. MIRA Head of Agriculture, Liz O'Leary, said "It is also an example of the private and public sectors engaging with one another to develop new ways of helping to meet environmental objectives while enabling productive use of land at times of high flows."

Clark & Tait, one of the oldest remaining multi-family grazing partnerships in Australia, has announced the listing of its portfolio of central western Queensland grazing properties. The portfolio of seven properties cover approximately 535,000 hectares, and have a combined carrying capacity of approximately 53,000 cattle (adult equivalent basis) in normal seasons. The properties will be offered as a whole, or individually.

The 'Midkin Aggregation', one of Australia's largest vertically integrated cotton operations, has been offered for sale by Auscott Limited. Located in the Gwydir Valley of north west New South Wales, the offering consists of six farms covering a combined area of 17,307 hectares. It includes 12,367 hectares of arable land of which 7,647 hectares is fully developed for irrigation. The aggregation includes the Midkin gin.

Commodity Market Movements

China has become Australia's largest export beef market by volume. The foundations which have supported this rise have been building over the past 12 months with record in-month shipments to China being set earlier in 2019. Data released by the Department of Agriculture shows 28,214 tonnes of chilled and frozen Australian beef were exported to China in July 2019, approximately 25 percent higher than the previous month's record, and twice the size of shipments for the same July period last year. Accounting for nearly 25 percent of Australia's total beef export volume last month, it was sufficient to overtake major market incumbents Japan and the US, to take the top spot.

Australia's sheepmeat exports fell 18 per cent in July 2019 to 25,537 tonnes. According to trade statistics compiled by Meat & Livestock Australia, total lamb exports for the month reached 18,238 tonnes, representing a drop of 11 percent compared with June and 16 percent below July last year. Mutton exports saw even sharper cuts with a fall of 33 percent from June recorded and a 29 percent year-on-year decline. The falls reflected a drought-induced drop in production and soaring sheep and lamb prices.

Approximately one third of Australia's sheepmeat exports went to China. Importing 8,089 tonnes of sheepmeat in July, exports to China were approximately double shipments to the United States. Lamb exports to the US month-on-month fell by 20 percent while mutton exports declined by 32 percent.

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A significant deficit in the supply of hardwood woodchips is expected in the Asia-Pacifc region over the next 3-5 years according to Midway Group managing director, Tony Price. Speaking at the recent DANA conference in Brisbane, he suggested demand from China, already the world's biggest importer, is expected to continue growing. Mr Price told the conference that China had been a strong and consistent importer of hardwood chips since 2007, with imports now more than 12 million bone-dry million tonnes. Capacity had expanded, with big growth in areas such as tissue production.

Water Markets

The Coalition Government released terms of reference for the Australian Competition and Consumer Commission's inquiry into the Murray Darling Basin water market this week. The inquiry will look at options to improve the transparency and efficiency of the water market. It will also examine changes in water use, carryover water, trade between water valleys and systems and the effect of water speculators on the market. The Government has asked for an interim report to be delivered early in 2020 with a final report by the end of 2020. An outline of the terms of reference for the inquiry can be found via the Treasury website.

Murray Darling Basin states have unanimously agreed to a Murray-Darling Basin Inspector-General. The new Inspector-General will monitor the roll-out of the Murray-Darling Basin Plan and will make sure all water users are following the rules. Minister for Water Resources, David Littleproud, said he expected the legislation to create this new statutory role would pass Parliament next year. Until then Northern Basin Commissioner, Mick Keelty, will become the Interim Inspector-General. The role will replace the Northern Basin Commissioner, with oversight of both Northern and Southern Basins.

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Weather

Southern Australia has just had its driest January to July on record. Rainfall for the April 2018 to July 2019 period was in the lowest 10 percent of historic records for most of Gippsland and the Mallee, and parts of the north central and north. Both the West Gippsland and East Gippsland rainfall districts were driest on record for the 31-months from January 2017 to July 2019. At the same time, large parts of New South Wales and eastern South Australia had severe rainfall deficiencies. In some areas,16-month April-July rainfall totals were the lowest on record.