Australia Is Riding Beef Industry’s Wave of Prosperity Now
Last week, Australia’s only publicly listed cattle and beef producer, Australian Agricultural Co (AAC), have surged to four-and-a-half year highs, trading as high as $1.63 on the Australian Stock Exchange, up 43 per cent year to date.
Also in last week, Australian Country Choice (ACC) have been given permission to build a 65,000 head feedlot on one of their aggregations, which is an important part of the company’s long-term strategic plan. Although it was just reported that ACC was suspended from trading meat to China last month, ACC still see long term opportunities in the beef industry.
According to 2021 Australian Farmland Values report released by Rural Bank, despite the impact of COVID-19, the median price per hectare of Australian farmland increased by 12.9 per cent in 2020. It was the seventh consecutive year of growth, bringing the 20-year compound annual growth rate (CAGR) to 7.6 per cent. Over the last five years the CAGR was 10.6 per cent, and over 10 years 6.3 per cent.
The outperformance for these cattle relevant assets is contributed by the cattle price. The price of young cattle at market is more than double in less than two years.
The reason for the price rise is largely due to rising beef demand, both domestically and globally, coinciding with a lush pasture season that has led to cattle farmers keeping stock to breed more calves.
Global demand for Australia’s high-quality beef is still strong, or much stronger.
Despite ongoing political and trade tensions between the two countries, the value of frozen beef exporting to China has risen, not just because of rising prices, but also the increase in volumes, according to Meat & Livestock Australia (MLA). Considering the enlarging number of the middle class in China, their appetite for high-quality protein will continue grow beef demand from Australia.
East Asian countries, Japan and South Korea represented a combined $3.7 billion worth of beef exports for Australia in 2020, 38 per cent of Australia's total beef exports by value, according to MLA. And Rabobank expects total import volumes for Japan to grow over the next five years at an average of two per cent per year, while South Korean total beef imports are forecast to grow slightly faster at just under four per cent per annum. Their consistent and stable consumption patterns, ease of doing business and ability to optimise carcase value provide a foundation for Australia’s beef exports.
Beef exports into South-East Asia are also starting to recover after the coronavirus pandemic.
In addition, global demand for Australia’s beef is further enhanced by its “disease free”, with the outbreak of African swine flu in China and Mad Cow Disease in Brazil.
Underpinned by a booming grazing property market, continued strong international demand for beef and record high cattle price levels for store and slaughter stock, Australia is riding a wave of optimism and confidence in beef industry prospects for the immediate future.
At the same time, the Bureau of Meteorology is predicting above-average rain for all major cattle regions through until the end of February. It is also forecasting that Australia will experience a mild La Niña this summer. This increased rainfall should translate to increased pasture growth, which will continue to strengthen the national herd rebuild into 2022, Meat & Livestock Australia says in its latest industry update.
It is always the best time to invest in Australia’s beef industry.
At Wharton, we manage a portfolio of three cattle farms in Western Australia with a total area of approximately 1,000,000 hectares. Benefited from our precise decision, we acquired the properties at its lowest point due to the big drought in 2019, and we have successfully recorded great capital appreciation since then. With our experienced and dedicated agricultural professionals, we aim to create the properties max potential for our investors. If you want to know more about agricultural investment, please contact us info@whartoncapital.com.au.