Weekly Agribusiness News Recap

This article is bought to you by Trigger Vale Sheep Studs. 

By Georgia Devenish - Agricultural Research Analyst at JLL. 

Agribusiness

Duxton Vineyards Group has emerged as the purchaser of Stanley Winery near Mildura. Duxton owns several major vineyards in the Murray Darling region and was already a customer of Stanley Winery. The vendor, Accolade Wines, has plans to transfer all production and storage to its Berri Winery where the company had recently invested $40 million in a new bottling plant and warehouse facilities. The sale comes as part of a wider restructuring of the Accolade Wines business since it was acquired by Carlyle Group in April 2018.

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Seppeltsfield has acquired 'Tanunda Hill' vineyards in the Barossa Valley. The 323 hectares of vines will bring the company's ownership in the wine region to 1,618 hectares. Executive chairman, Warren Randall, suggested that the company was in possession of the largest vineyard holding by a single producer in the Barossa Valley in history. Mr Randall also said that, "This brings Seppeltsfield holdings to 20 percent of the Barossa's total red vineyards, putting us in a strong position to consistently supply in excess of 12 million bottles of Barossa luxury red wine to the world."

Treasury Wines has reported a 16 percent growth in net profit for the 2019 fiscal year. Increased demand for luxury wine in both domestic and international markets bolstered the net profit of $419.5 million. Treasury Wine's CEO, Michael Clarke said, "Today's results confirm the positive momentum in our business which is being delivered through our premiumisation strategy." The strongest earnings growth occurred in the advancing Asian market, where EBITS (earnings before interest, tax and agricultural accounting standard SGARA) increased 43 percent to $293.5 million.

The Australian Competition and Consumer Commission (ACCC) has flagged competition issues around Saputo's proposed purchase of the Tasmanian cheese operations of Lion Dairy & Drinks. "The proposed acquisition would combine processing plants of the second and third largest acquirers of raw milk, and significantly increase Sap­uto's market share," the ACCC said. "While other processors will remain in Tasmania, the ACCC's preliminary view is that the proposed acquisition may decrease the intensity of competition for raw milk, resulting in lower farmgate milk prices or less advantageous terms of supply being offered to farmers." Despite this, Tasmanian dairy farmers are reportedly generally not concerned about lack of competition.

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Fonterra has released a statement writing down the value of its Australian Ingredients business by NZ$70 million. The global business is expecting a NZ$590-675 million loss this year. Fonterra chief executive, Miles Hurrell, said, "Our Australian Ingredients business is adapting to the new norm of continued drought, reduced domestic milk supply and aggressive competition in the Australian dairy industry."

Saputo Dairy Australia is in the process of finalising agreements to process milk for customers other than Coles through its Laverton North and Erskine Park plants.Speaking in Canada after the company's annual meeting, Saputo president and chief operating officer, Kai Bockmann,said the renegotiation of the contract with Coles had opened the way for it to process more milk through the plants that were built by Murray Goulburn five years ago.

Saputo chair and chief executive officer, Lino Saputo, said while overall milk production was declining in Australia, Saputo was still aiming to hit its targets for milk processing. One strategy the company is targeting to mitigate the implications of greater competition for milk supply was to direct raw milk into higher margin products. The proposed acquisition of the Lion specialty cheese business is part of this strategy. Mr Saputo said, "Our desire is to be a specialty driver of dairy goods all over the world."

Agtech

Belgian supermarket, Colruyt, is testing automatic production recognition at the checkout. With the aid of AI, fruit and vegetables are placed on a set of scales and are automatically recognised via a camera mounted above. Initial testing shows that in 97 percent of cases the correct production was shown. The technology which uses a unique 'deep learning' model that can recognise the 120 types of fruits and vegetables, was developed in collaboration with AI company, Robovision.

Water

Progress has been made in the Fitzroy Basin of Western Australia as key stakeholders met at a two day forum to decide on a set of principles to apply within any development proposal for the region. Attended by pastoralists, traditional owners, green groups and State and Federal government representatives the informal agreements largely surround water resources. They outcome was an important step toward the creation of a water management plan which was part of the election commitments by the McGowan Government. The creation of a Fitzroy national park, and ensuring the Fitzroy River and its tributaries are not dammed were central to the promise. Other interests lay with Hancock Agriculture and Cleveland Agriculture which are looking to irrigate fodder crops.

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The South Australian forestry industry has spoken out over water licencing issues in the south east corner of the state which they suggest has curtailed growth of the industry in the region. There is more than 150,000 hectares of commercial plantations in the lower Limestone Coast region however via the 2013 Water Allocation Plan up to a quarter of forests did not secure licences which would allow them to access adequate water resources. Growers are reportedly looking to Victoria to replant once forests are harvested in South Australia.

Commodity Markets

According to the most recent United States Department of Agriculture (USDA) cotton market publication, US shipments to eight of the ten top markets fell with the largest decline observed to China. Trade barriers were an obvious cause to the fall while China actually increased global imports last year. On a brighter note for US producers, the country's top export market, Vietnam, continues to grow. Exports to India also experienced growth with volumes surpassing 2017/18 levels by more than two-thirds.

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The slide continues in the wool market this week with the Eastern Market Indicator falling 112 cents per kilogram on Wednesday to close at 1,564 cents per kilogram. This follows a 78 cents per kilogram drop last week. According to the Australian Wool Exchange, 35.3 percent of wool offered yesterday was passed in. Reports are largely pointing to international trade issues as the cause for the instability in the market. Issues on Wall Street were also cited as affecting the market.