Recent projections by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) that Australian agricultural production will hit $91 billion in FY 25/26 - marking the third-highest level on record – are welcome news for ASX-listed Ag stocks.
Underscoring ABARES' strong projections are favourable weather conditions, a strong winter crop and soaring demand for Australian red meat from key trading partners such as the United States, China, Japan, and the Middle East.
While livestock and livestock products are expected to reach a record value of $40 billion, meat exports alone are projected to hit $22 billion this financial year.
The livestock sector benefits from a 7% rise in livestock prices.
This has led to gains in beef, veal, live cattle, sheep meat, live sheep, and poultry.
Crops
Beyond livestock, ABARES forecasts winter crop production of 59.8 million tonnes, making it the third-largest national winter crop on record.
“Winter crop production volumes have risen by 16 percent to a total of 55.1 million tonnes, thanks to favourable growing conditions in New South Wales, Queensland, and Western Australia,” said Dr. Jared Greenville, executive director of ABARES.
However, despite the improved production outlook, crop prices are expected to decrease by 2.5%, due to a global oversupply and lower demand from major importers.
Regional Variations
While favourable weather patterns in New South Wales and Queensland, along with timely rainfall in Western Australia, drive strong crop yields in these regions, both Victoria and South Australia are two outliers.
Both southern states are expected to experience lower crop yields due to unfavourable weather conditions.
Wheat
While ABARES forecasts a total wheat crop of 30.5 million tonnes, 11% down on the previous season, the projection remains above the 10-year average.
Meanwhile, the International Grains Council expects global wheat production to reach a record 805 million tonnes in the crop year 2025-26, an increase of 1% from the previous year.
ASX stocks likely to benefit
After the mid-2023 takeover of ag stock Costa Group (formerly ASX: CGC) with a market cap of $1.5 billion, two larger ag stocks left on the ASX are Elders and Ridley Corporation.
Elders (ASX: ELD)
The company works closely with primary producers (farmers) to provide products, marketing options, and specialist technical advice across rural, wholesale, agency, and financial products and services. It also has a rural and residential property agency and management network.
Market cap $1.3 billion; share price down 21% over one year and down 1% year to date.
The stock is trading at around 10x FY26's estimated earnings and UBS expects profit to continue rising slowly and steadily.
The FY24 results – released in November last year – were disappointing, with revenue down 6%, underlying operating profit down 25%, and statutory profit down 55%.
Elders shares appear weak with little demand.
No consensus.
Ridley Corporation Ltd (ASX: RIC)
Provides animal nutrition solutions. The company produces food and supplements to meet species needs.
Market cap: $800 million; share price is up 7% over one year and down 6% year to date.
Late February the stock feed producer posted a 1H FY25 statutory net profit after tax of $22.2 million, up 3.5% on the previous period.
The stock appears to be in a long-term uptrend confirmed by multiple indicators.
Consensus is Moderate Buy.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.
