PAG - PrimeAg Australia

[numbercruncher]

Soft Commodities have all the hallmarks of being the next hot asset class.

So much rain lately is adding a positive spin to much Australian Agriculture.

Overview
PrimeAg Australia Limited ("PrimeAg") is an investment that seeks to take advantage of the increasing global demand for soft commodities.

Structural changes occurring within the soft commodities market

Soft commodities can be broadly defined as commodities that are grown, rather than mined. Australian soft commodity crops typically include (but are not limited to) wheat, barley, chickpeas, sorghum and cotton. PrimeAg also intends to produce some livestock products.

Global soft commodity markets are currently experiencing a strong surge in demand, driven by:

Strong global population and economic growth

Since the 1950s, the world's population has increased from 2.5 billion people to over 6.5 billion people in 2005. The world's population is projected to grow to 9.2 billion by 2050. This growth will create a corresponding increase in the demand for soft commodities.

In addition, recent strong economic growth globally is changing consumption patterns towards higher value agricultural products, with this growth being particularly driven by the BRIC economies (Brazil, Russia, India and China).

Inflation fears

Food price inflation has recently become a major issue in developing economies. During 2006, India alone experienced an inflation rate of 6%, with concerns that wheat demand will continue to exceed domestic supply in the near term. Food inflation fears will thus lead to more imports of soft commodities.

Biofuels industry

Governments around the world are continuing to mandate the use of biofuel blends in transport fuels, with major commodities used for bioethanol production (including corn, sugar and wheat) experiencing higher prices in recent times.

Livestock feed market

The growing demand for soft commodities is being partly driven by the livestock feed market. Most of the future demand for coarse grain and oil seed meals is expected to come from growing livestock industries in developing economies.

While global demand for soft commodities is undergoing strong growth, the supply of soft commodities is tightening.

Declining stock-to-use ratios

Global stocks for most soft commodities remain at all time lows, indicated by declining stock-to-use ratios.

Possible supply interruptions

Some countries have a specific competitive advantage in producing certain crops (eg. corn production in the United States and soybean production in South America). An interruption to production from any of these major crop producing countries would have a negative impact on importers and industries worldwide.

The demand driven nature of the current market is a structural shift from previous supply driven market surges. It appears that prices for most agricultural commodities will remain historically high (although below 2007 levels) and volatile for some time.

http://www.primeag.com.au/offer/overview/

THE world's first listed pure soft commodities company, PrimeAg, was always going to struggle on the ASX, particularly making its debut the day before Christmas.

But the area it is in - soft commodities - has all the hallmarks of being the next hot asset class.
PrimeAg is a concept stock because it is untried.

The purpose of the float was to raise $300 million to buy farmland and water entitlements to take advantage of the increasing demand for mainstream soft commodities such as wheat, barley, chickpeas, sorghum and cotton, as well as livestock.

If the company can find the right land to buy at the right price, and grow soft commodities, it will put itself in the box seat to soak up structural changes in demand for food.

The PrimeAg board has managed to attract blue bloods such as former Woolworths chief executive Roger Corbett, who knows more than most about food, along with chairman Peter Corish, a former head of the National Farmers Federation.

It has also attracted some blue blood investors who know the agricultural sector well, including James Packer's Ellerston Capital, which emerged this week as a 9.7 per cent shareholder.

For this reason, a 15 per cent slide in PrimeAg's share price on the first day of trading should not be read as a sign that the company will be a dog. Rather, it is a new class of stock that needs time to develop.

The upshot is whoever buys into this stock needs to view it as a long-term bet on the next big boom: food.

The PrimeAg prospectus lists the following risks: "soft commodity price fluctuations; drought, flood, hail, bush fires and other extreme weather conditions; change in water regulations; lack of operating history; availability, cost and timing of acquisition of further agricultural properties; reliance on key personnel and ability to attract personnel; pests and diseases; water sustainability; regulation and legislation; interest rates; exchange rates; and asset liquidity."

http://www.theaustralian.news.com.au/story/0,25197,22973590-5014000,00.html

 

[Agentm]

well they got the water they needed, but it was a touch too much from 0% to 100%. been watching PAG since it listed.. accumulated a tiny parcel to get the feel of this industry which is new to me.. small steps..

 

[grace]

I know quite a bit about this one. Peter Corish (Chairmen) would have to be the luckiest man alive to sell his property "Brayland" into this company at about 70% more than what he paid in about 2 years (don't quote me on time, but about that). He bought "Brayland" for $19mill, and sold for about $32mill from memory. In that time, irrigation properties have DEVALUED! I know that valuations were done, but I question the value that was put on his properties. The valuer's head is on the chopping block I guess. He sold a couple of others as well.
Noone I know has seen that sought of increase recently as there has not been any water (and at the time of prospectus, there still wasn't). Per the prospectus he gets $500 000 to go shopping for more properties. What fun! I guess your investment comes down to profits though. Glad it has rained and one dam is full. Good luck to all holders though.
You know my parents (now retired) grew wheat in 1993 and sold for over $300 tonne. Wheat has only recently passed that. It is still a joke what farmers get for wheat these days, when the major inputs have sky rocketed since the 90's. I personally see difficulty in this company getting a so called 10% return when they have overpaid for their property in the first place. Just one persons view.......

 

[josjes]

There are plenty of other Agricultural established companies on the ASX that deserved your money than this newly listed.
Do your own research on ABB, AAC and GNC. Look at these 3 company chart, if you must invest in Agricultural sector, I'd rather put my money on these 3 companies than an untested, unproven newly listed company.

 

[The Once-ler]

On the 22nd of January, with the announcement of Fairburn dam spilling, PAG said,....


"“While the heavy rains and flooding has resulted in some crop damage on
‘Brayland’ the upside is we can now plan our crop production well into the future
with more certainty,” he said.
Mr Corish said the company will make shareholders aware of the full impact of
crop damage on “Brayland” once the flood waters recede, which is expected to
be in the next few weeks.".


I wonder what happened to the investor update? I was thinking there would be some massive damage to the cotton crop on 'Brayland', and the bad news would be a good chance to enter PAG after a dip in share price, because in the big picture, the floods and full dams are much bigger plus than one ruined cotton crop. Perhaps sorghum was the main crop instead of the more flood prone cotton, in which case, the sorghum would recover.

The general concensus is that PAG have over paid for the land, but with the massive increase in grain prices, what is the land worth now? Some big profits coming if things go right for once.

I don't hold, but thinking of entering.

 

[Miner]

Dear

Folks

Any one is following this PAG and comment on its prospects considering there is a world wide food shortage coming and if PAG has the short gestation period to make a killing of this situation ?
Their main product is wheat and that is not alone sustainable to increase the bottom line.

Any thoughts will be welcomed.

Regards

 

[yang]

Miner,

have been thinking the same thing about this stock - I have been meaning to sus this out a lil more... I rekon it could be well worth a small parcel

yang

 

[grace]

Dear

Folks

Any one is following this PAG and comment on its prospects considering there is a world wide food shortage coming and if PAG has the short gestation period to make a killing of this situation ?
Their main product is wheat and that is not alone sustainable to increase the bottom line.

Any thoughts will be welcomed.

Regards

Wheat prices have gone up, but so have FERTILIZER, FUEL, CHEMICAL incrementally more. Don't expect good returns in wheat because of rising costs unless wheat goes over $1000/tonne. Just my thoughts, and we are wheat farmers.....

 

[MEGALADON]

Just looked into this one for the first time.

This company has significant agricultural land holdings and their focus finely balancing water rights and crop yeild.

I wonder if they have undertaken any mineralisation studies on their land holdings?

 

[System]

On November 5th, 2013, PrimeAg Australia Limited (PAG) was removed from the ASX's official list following the implementation of the scheme of of arragement whereby Australian Food and Fibre Limited ("AFF") acquired all of the Company's securities which AFF and Dr David Robinson did not already own.