Finding a way to invest in the food sector is looking pretty appetising, especially at a time when global financial markets are going pear-shaped.
The Australian Bureau of Agricultural and Resource Economics and Sciences expects farm exports to grow six per cent to a record $34.5 billion in the 2011-12 season, thanks to a bumper harvest and rising demand.
Many investors see the nation’s only listed major grain trader, GrainCorp, as a way to buy into the growth for meat demand in Asia, given Australia’s agricultural potential and proximity to rapidly-developing countries like China.
GrainCorp last month reported a full-year net profit of $172 million, more than double the previous fiscal year.
Volumes of grain exported by the company, which specialises in grain storage and handling, jumped 131 per cent to 8.1 million tonnes.
GrainCorp spokesman David Ginns said much of the rise in exports last year came from shipping feed wheat to livestock producers in destinations like the Philippines and South Korea.
‘‘Given that there’s some similar harvest conditions this year to last year, there's going to be a similar export program,’’ Mr Ginns said.
What makes the company particularly attractive is its position as one of the only remaining buyout targets in a sector that has seen a surge in foreign investment in recent years.
UBS analyst Lachlan Parker maintained GrainCorp as a buy rating after it reported its 2010-11 financial results, and said it remained a likely potential takeover target as a ‘‘second year of very strong cashflow looks highly probable’’.
He said GrainCorp’s share price was up about 30 per cent compared to the same time last year, at $7.87, and could reach $9 over the next 12 months.