It's official. January was hot. Damn hot.
The latest three-month outlook from the weather bureau doesn't hold a lot of joy either, reporting much of western and southern Australia, and parts of the northeast, are likely to experience a drier than average February to April.
It has warned there is a 50 per cent chance of El Niño developing during the autumn, which would probably mean warmer and drier than usual conditions, and a later autumn break.
Perhaps not a good time to buy into the cattle business. We could see more destocking, and maybe even higher prices for feed, wheat and barley, already up about 70 per cent over the past year.
The renewed critical focus on the live export trade is mainly focused on sheep, but it isn't helping the live cattle trade either. This might be a very silly time to buy into beef, which, of course, is what the Punter has just done.
Last week, having had his eye on the Australian Agricultural Company's shares for a while, he took a deep breath and bought 2000 shares (ASX code AAC) at $1.075.
The loss-making company does hope to return to profit this year, but it isn't promising a dividend in the foreseeable future.
But if and when decent rains return, feed grain prices should drop and cattle prices rise. It won't happen in a hurry, but the Punter will be happy to wait a year or two for a profit.
His timing has been influenced partly by the fact there seems to be a fairly strong demand for the shares at the $1.06 to $1.07 level. At the time of writing, there was one buyer in the market for 250,000 shares and another for 113,000 shares – serious players.
Hopefully the debacle of the Livingston processing plant in Darwin is a thing of the past, and the focus on higher margin branded beef, particularly wagyu, will continue to pay off.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.
