Ag stocks weather the shock market storm

Australian agribusiness has proved the shining light amid the financial calamity of coronavirus.

Agribusiness stocks are holding strong. Picture: AAP/Joel Carrett

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AUSTRALIAN agribusiness has proved the shining light amid the financial calamity of coronavirus.

Agribusiness companies, particularly those involved directly in producing or processing food, have generally outperformed the local stock market.

As AgJournal went to press, seven of the biggest Australian agribusinesses listed on the Australian Securities Exchange had share prices higher than what they were prior to world markets tanking on February 24 as COVID-19 spooked global share markets.

In line with the adage that if US equity markets sneeze, the ASX catches a cold, the Australian exchange’s All Ordinaries Index fell 36.9 per cent – more than the US indices, NASDAQ, FTSE 100 and S&P 500, which slumped 28.4 per cent, 32.5 per cent and 33 per cent, respectively.

The All Ordinaries also plummeted lower than Japan’s Nikkei index (29.2 per cent) and Hong Kong’s Hang Seng index (20.6 per cent).

Despite this, the seven best performing Australian agribusinesses – dairy processors The a2 Milk Company, Bega Cheese, Bubs Australia and Keytone Dairy, along with pastoral house Elders, Ricegrowers Limited and industrial hemp producer Australian Primary Hemp – now sit 9-20 per cent higher than before the market slump.

It is not hard to notice that five of the seven companies are food processors, all with strong export capabilities.

The a2 Milk Company actually posted a record share price during the turmoil: $19.23 a share on April 17. Its share price was $15.63 before the ASX sharemarket crashed on February 24, and has been largely untroubled by the sharemarket pandemonium.

The performance of Australian food companies has not surprised Agribusiness Australia chairman – and Elders chief executive – Mark Allison.

Allison says there has been little significant disruption to food companies operating in the domestic market, such as those providing meat and fresh fruit and vegetables.

Companies providing nondiscretionary products internationally, such as milk powders, are also doing well. “Those companies with a sound business model with cost and capital base and appropriate leverage in terms of debt were able to move through this crisis pretty comfortably,” he says.