Heading into mid-2019, the year has been calm so far for ASX’s food and agriculture stocks.
Stockhead’s analytics team analyzed the numbers of 34 small and mid-cap players in the industry and found only 13 in positive territory.
The group’s profile is relatively diverse, with 22 different specialty areas ranging from seed products to ginger growers, from pies and pastries to potato farming.
However, for the eight companies with double-digit gains, the representative number of sectors was reduced to just four; infant formulas, dairy products, seafood and agro-tech.
Many investors are aware of the recent success of Bubs (ASX: BUB), which has almost tripled this year as it successfully runs on a proven and reliable path; the export of infant formula to China.
Second best performer Keytone Dairy Corp (ASX: KTD) is adjacent to Bubs as a manufacturer of powdered dairy products (no infant formula though) and also has an export strategy for China.
But while we’re on China, another well-worn topic of discussion is the macroeconomic opportunity in livestock; so that Australia becomes the “food bowl” of Asia.
Australia now exports around 30,000 tonnes of beef per year to China, up from 2,000 tonnes in 2012.
However, so far this year that doesn’t appear to have translated into a recent boost for Australian breeders – at least in the listed space.
The 195-year-old beef producer Australian Agricultural Company (ASX: AAC) is stable for the year, while the cattle exporter Wellard Ltd (ASX: WLD) fell 25 percent.
And at the broad end of the spectrum, the agricultural conglomerate Seniors (ASX: ELD) lost momentum in 2019 after a successful turnaround strategy in recent years.
Recent price movements indicate that innovation – and the ability to react quickly to new trends – will be an important part of the value proposition for Australian agricultural stocks.
On the one hand, innovative solutions to compensate for climate risk will remain predominant; research of Storer by March of this year, ASX small caps exposed directly to climate change (the top ranchers on that list) had fallen seven percent in the previous six months.
But based on global market trends, investors will also be looking for companies that capitalize on changing trends in consumer behavior.
Are they ready to embrace the investment case for vegan food and other health topics? It seems to be still a long way off.
Stockhead’s 2019 list of agricultural stocks only included two companies dedicated to plant products; organic food producer Murray River Organics Group (ASX: MRG) – up five percent – and maker of healthy juices Food Revolution Group (ASX: FOD) – down 37%.
But based on recent trends in global markets, there is every chance that local investors are ready to embrace emerging trends in clean and vegan agro-tech products.
Last June, investment group Beyond Advisors established the US Vegan Climate Index, a selection of large-cap US stocks, selected for companies and sectors that do not meet metrics such as animal exploitation. and the carbon footprint. So far, it has outperformed the S & P500 at large.
And the recent IPO of Beyond Meat – the Los Angeles-based producer of plant-based meat products – also turned many heads.
Amid a recent IPO frenzy in the US markets, shares of ridesharing platforms Uber and Lyft both fell from their initial offering price. Conversely, Beyond Meat has jumped from its May 2 listing price of US $ 25 and is currently trading above US $ 70.
Even the fast food chain McDonald’s, which has long said there was no demand for a veggie patty in Australia, announced earlier this month that it would be testing a McVeggie burger in response to the changing consumer tastes.
It remains to be seen how these trends will translate into the listed investment space.
However, the big themes around eating habits and climate concerns have at least led some investors to wonder where the next market opportunity could be.