Record crop set for better returns

Martin Roth
Be selective when investing in the agribusiness sector to avoid disappointment.

 

Rising prices, growing demand and some global shortages have combined to propel the agribusiness sector into the investment spotlight. However, despite what appear to be excellent fundamentals, a paucity of quality stocks means local investors must be selective if they wish to become involved with this theme.

Two events in August illustrated the potential. First, Russia declared a ban on wheat exports after its worst drought in 100 years, prompting a surge in global wheat prices. At the same time, the best conditions in at least 10 years meant that Australian east-coast wheat farmers appeared set for record harvests.

Then BHP Billiton announced a $US40 billion takeover bid for the world’s largest potash producer, Potash Corporation of Saskatchewan (PotashCorp), citing the buoyant outlook for global demand (see breakout). >>> more