Agribusiness Newsletter May 2009
Contents
Meat Industry
Wine Industry
Fishing Industry
Dairy Industry
Grain Industry
Other
Meat Industry
Saudi Arabia opens live export market with Northern Territory
- Following the signing of a memorandum of understanding between the Federal Government and the Arab state, a new live export destination has opened and is expected to offer a higher price than the traditional South East Asian Markets.
- Exports to Indonesia are expected to remain the Northern Territory’s main market, with new opportunities also opening in Vietnam who will begin buying NT cattle later this year.
- Top end cattle producers believe production can be increased by as much as 30% in the coming 10 to 15 years.
Australia’s biggest cattle producer in the spot light
- Futuris Corporation, a former 43% shareholder in Australian Agricultural Company (‘AA Co’), is looking to sell the remainder of its stake to concentrate on its core Elders and forestry business.
- IFFCO Poultry, a Dubai based food group purchased 15% of Futuris’s stake in February 2009 and agreed to buy another 5% in April 2009. It is also understood that Melbourne Barrister, Alan Myers QC, has agreed to purchase the remaining 20% of AA Co for $89.8m on the condition AA Co purchases two of his NT cattle stations for $105m, with the 3% balance of the stake to be sold into the market.
- The jostling amongst major share holders of AA Co continues, as shareholders voted against the proposal at an extraordinary general meeting on 28 April by 72.5%. Futuris was excluded from the vote and now must restart talks with interested parties.
- Recent property sales activity in North Queensland continues as AA Co sells three gulf properties for $145.7m to Paraway Pastoral Company who is part of the Macquarie Pastoral Group, and Rockhampton Downs for a reported $35.7m to the Harris Family.
- Nick Burton Taylor, a former director, chairman and acting CEO of AA Co and still a major shareholder questioned the Myers proposal.
- In addition, AA Co has been accused of overstating the size of its cattle herd by 183,000 ‘ghost cattle’ by Perth businessman, Donald Fuller. Mr Fuller claims he led a multi-billion dollar proposal to buy Futuris’ stake, tying Cargill with AA Co in which negotiations were hindered by the lack of transparency.
- The matter is now in the Supreme Court as AA Co directors launch a defamation claim against Donald Fuller.
Cattle Tick Free Zone Threatened
- Queensland’s tick free zone which covers much of the west and south west of the state was breached early in April when a horse was transported without a permit and later found to be hosting ticks. The parasites were later confirmed to be cattle ticks by the local Primary Industries entomologist and were eradicated appropriately, with further stock movement restrictions placed on the area.
- The parasite is responsible for much economic loss among cattle producers on the coastal fringes, where it has not been possible to establish or eradicate cattle ticks. Breaching of the tick free zone could have seen the spread of tick fever and red water among cattle that have no resistance.
- Whilst the risk of an outbreak was considerably lower because the ticks were found on a secondary host, it highlights how important bio-security measures are when protecting producers and industry who benefit from the tick free status.
Wine Industry
Exports rebound as the UK stabilises, US sales go up and the Far East surges
- The Australian Wine and Brandy Corporation (‘AWBC’) reports a surprising turnaround in data (given the global economic crisis).
- True, wine exports fell 2% in volume to 723ml, and 14% in value to $2.44bn in the 12 months to March, but the moving annual total, according to AWBC figures have improved for the first time since October 2007.
- In those 12 months in the UK, (Australia’s biggest wine market), there was a 41ml decline in bottled wine sales compared with the 19ml rise in bulk wine exports for which prices increased 2% (because higher priced wine was being shipped in bulk, instead of being packaged in Australia).
- Furthermore, the AWBC advises that there are early signs that falling UK bottled wine sales have stabilised, while those in the US have been increasing in recent months.
- Again, it’s bottled wine sales that have gone up in the 12 months to March this year and in some instances markedly. Japan, mainland China were up 49% and Hong Kong up 26%.
Climate change will impact planting regions
- Dr Tony Jordan, former head of Moët Hennessy’s Australasian portfolio (including Cape Mentelle and Cloudy Bay), announced at the recent inaugural International Sparkling Wine Symposium that vines being planted now would be in the wrong place 30 years hence,
- Dr Jordan further advised, “Producers, not only those of sparkling wines, would face untold upheaval if they failed to realise that climate change was inevitably decreasing quality of varietals traditionally planted in particular regions”.
- Because of its comparatively greater mass and lesser ocean influence, the Northern Hemisphere would be more keenly affected by the change, although Imperial College of London research suggested there would be an initial advantage for UK producers of being able to grow Chardonnay and Pinot Noir grapes in the north of England by 2080.
- Dr Jordan, now a wine consultant, told the Symposium: “Bordeaux, Burgundy and Champagne will become marginal for their styles and will therefore have to migrate, which means different terroir and possible style changes. However In Australia it will be a damned nuisance, though easier for producers wanting to stick with the same varieties, to move vine locations from say, the floor of Yarra Valley higher up the mountainside”.
- He added that producers needed to decide now whether they were looking at harvesting in 10, 20, or 50 years, “for the picture is progressively changing”.
Coonawarra’s court case could have national implications
- The Penola Ratepayers’ and Residents’ Association in South Australia’s south-east has launched a Supreme Court action to prevent Wattle Range Council building a multi-million dollar by-pass road through the world renowned Terra Rossa Coonawarra wine region.
- The by-pass will require compulsory acquisition of Terra Rossa vineyards from the Foster’s and Rathbone Wine Groups, Jim Barry Wines, Bill Brandand, Mark Messenger, and the Williams family.
- As the future of Australia’s wine industry depends increasingly on promotion of particular regions, there is national interest in whether the people of Penola can successfully challenge the reclassification of common land into community land on the town’s southern boundary, which land is also required for the by-pass.
- The court action stems from a perception by Penolans that since Penola Council’s amalgamation a decade ago with other south-east councils, they‘ve become increasingly isolated.
- Foster’s director of wine production, Stuart McNab says “that while everyone agrees heavy traffic should be diverted from Penola’s town centre, the level of dissent indicated clearly a need to work with the community to find a more palatable option than the one being forced on them”.
Wine centre to be built in Hong Kong
- The Chinese have approved a Memorandum of Understanding (‘MoU’) to build, in Hong Kong, a wine centre similar to the once much-maligned National Wine Centre at Hackney in Adelaide.
- The document, signed by Hong Kong Commerce and Economic Development secretary Rita Lau and Australia’s Agriculture Minister Tony Burke, acknowledges the growing wine trade between the Chinese enclave and Australia.
- The MoU, the first signed with a New World producer by Hong Kong, aims to establish a regional distribution hub for the wine trade, and covers commercial cooperation, certification, wine-related tourism and anti-counterfeit measures.
Fishing Industry
As a world first, SA’s Clean Seas Tuna breeds Bluefin at Port Lincoln
- The company’s chairman, Hagen Stehrhas has announced production of 28-day-old, 2.5cm fingerlings after broodstock spawned more than 50m fertilised eggs and some 30m larvae in captivity over 35 days. He said major commercialisation of the project would begin late this year to present the world with a sustainable Bluefin tuna resource far into the future.
- The dawn of what will surely be a multi-million dollar breeding and farming industry, comes as world demand for tuna soars. It increases in the face of last month’s claim that stocks of Mediterranean Bluefin tuna are on the verge of collapse, so that a breeding population might well be non-existent
- by 2012.
- Fisheries Research and Development Corporation executive director Dr Patrick Hone says “Australians consume 450,000 tonnes of fish of all kinds annually, 70% of it imported. However, as more than 100 research scientists throughout the country make formidable progress, it’s expected farmed fish production could double to 100,000 tonnes a year by 2015”.
Fishermen’s protests against marine parks under fire from Wilderness Society
- The Society’s Campaign Manager, Peter Owen, says the commercial fishermen’s objections to plans to declare 46% of SA waters marine parks, are threatening to turn away hundreds of thousands of tourists who would welcome opportunities to dive in a pristine environment among coral and sea creatures. He says waters around Kangaroo Island and off SA’s west coast are “just as spectacular” as those of Queensland’s Great Barrier Reef Marine Park which attracts 1.9m tourists annually, and WA’s Ningaloo Marine Park which has 200,000 visitors a year.
- Even though it will still be possible to fish in the proposed marine parks, SA commercial fishermen’s organisations are united in the belief that if the plans proceed, they’ll put a stop to potential multi-million dollar investments in the State’s finishing industry.
Dairy Industry
Farm Gate Dairy Prices Weaken
- A recent Warrnambool Cheese and Butter Factory meeting announced to dairy farmers that prices would drop to approximately 12 cents per litre in June. This may have a compounding impact on dairy farmers currently facing high costs of production that are now slugged with low farm gate prices. The impact to some dairy farmers may mean lost revenue of hundreds of thousands of dollars over the next three months.
- A move to gain a greater share of the domestic market by Warrnambool Cheese and Butter Factory to assist stabilise farm gate prices may prove difficult as some dairy farmers are switching to rival companies such as Murray Goulburn following the announcement.
- The announcement by Warrnambool Cheese & Butter Factory comes following a fall of approximately 33% in global dairy exports in the December quarter.
- Warrnambool Cheese & Butter Factory shares are at a record low since the stock began trading in May 2004. This record low is due to the company forecasting a full-year loss and abandoning a proposed share sale to fund its part of the acquisition of Australian Cheese Company.
Grain Industry
Sowing gets underway
- The southeast portion of the Australian grain belt experienced good falls of rain in the period surrounding Anzac Day. Falls were generally in the range from 15mm to 45mm, with isolated heavier downpours.
- The arrival of rain was met with sighs of relief in many areas that received their first meaningful rainfall for 2009. It is also hoped that the recent blast of cold and icy weather in Southern Australia has heralded the Autumn break and that further reasonable falls of rain will follow shortly. If such a weather pattern were to be established, it would be the first decent Autumn break experienced in many areas for four years or more.
- The Bureau of Meteorology forecast a wetter than average outlook for rainfall over the May to July period in parts of Northern and Eastern Australia.
Industry consolidation begins
- Industry analysts have been predicting consolidation in the grain handling sector for some time now. The predictions weren’t realised late last year when the planned merger between AWB and ABB Grain failed to complete. One reason nominated for the failure of the merger, was unquantifiable future liabilities that may be faced by AWB as a result of its involvement in the Iraq oil for food scandal.
- ABB Grain has now confirmed that it is in discussions with the Canadian agribusiness company Viterra Inc. It is reported the discussions are centred on a bid by Viterra Inc for ABB Grain in the range of $9.00 to $9.50 for each ABB Grain share. Viterra prides itself on being Canada’s largest agribusiness company with extensive operations and distribution capabilities across Western Canada, in addition to operations in the USA, Asia and Europe.
Other
Moratorium on clearing of regrowth vegetation in Queensland
- Early 2009 has witnessed a flurry of activity in the pastoral industry across Northern Australia, as evidenced by a number of high profile deals involving corporate and institutional investors. Examples include:
- Australian Agricultural Co’s offers for the Tipperary and Litchfield Stations (recently rejected by shareholders);
- Terra Firma, a London based private equity group, acquiring a 90% stake in Consolidated Pastoral Co from the Packer family;
- the proposed divestment of an aggregation of properties in the Barcaldine and Winton regions by the Walker family (aka Tara Santa Gertrudis);
- the proposed divestment of Roxborough Downs by the North Australian Pastoral Co; and
- the Macquarie Pastoral Group’s recent acquisition of several Queensland and Northern Territory properties.
- Australian Agricultural Co’s offers for the Tipperary and Litchfield Stations (recently rejected by shareholders);
- While this level of activity can only be beneficial for grazing property values across the region, one issue whichhas the potential to adversely affect values in Queensland is the recent extension of the Queensland Government’s ‘Wild Rivers’ policy, and the introduction of a moratorium on the clearing of regrowth vegetation in the Mackay Whitsunday, Burdekin, and Wet Tropic catchment areas.
- For land owners of properties with extensive regrowth issues, the moratorium has the potential to significantly impact on the viability of affected properties, and as a consequence of this, the value of the property.
- Those properties with a pre-existing certified Property Map of Assessable Vegetation (‘PMAV’) from the Queensland Department of Environment and Resource Management will be largely unaffected by the moratorium. A PMAV designates areas that can be cleared without requiring approval, and as such, enables property owners to indefinitely manage regrowth in these areas without the need to apply for a permit. A pre-existing PMAV is likely to add value to properties in the affected regions, especially in the event that the moratorium is extended indefinitely.
Banana Industry voices concerns over Philippines Imports
- Following the Federal Government’s decision to allow bananas from the Philippines to be imported, producers are raising their concerns over not only being priced out of the market but also the biosecurity threat.
- There is potential for the Black Sigatoka disease to be brought into the country via the imported bananas. Black Sigatoka has a devastating impact on the crop and can reduce the yield by as much as 50%.
- Many of the local growers of the Coffs Harbour region are finding it difficult to compete with larger plantations in North Queensland and are worried the pricing squeeze from the import bananas will be enough to kill off the industry altogether in the region.
- Whilst Filipino bananas have not reached Australian shores, local producers are seeking assurances from Tony Burke, Minister of Agriculture Fisheries and Forestry, that strict quarantine measures will be enforced.
- The Independent Grocers’ of Australia chain has thrown its support behind Australian producers by placing a ban on imported bananas to be sold in their stores. Woolworths also said it would.
Contacts
SydneySteve Parbery t +61 2 8116 3000 Andrew Smith t +61 2 8116 3060 Level 46 t +61 2 8116 3000 BrisbaneGrant Sparks t +61 7 3371 7244 Level 3 t +61 7 3831 2700 AdelaidePeter Macks t +61 8 8211 7800 Level 10 t +61 8 8211 7800 | MelbourneJoe Dicks t +61 3 9653 6209 Rod Slattery t +61 3 9653 6204 Level 10 t +61 3 9654 1517 PerthSimon Theobald t +61 8 9382 8933 Level 10, Parmelia House t +61 8 9382 8933 Port MacquarieDavid Leigh t +61 2 6580 0400 Level 2 t +61 2 6580 0400 |
