# AAC - Australian Agricultural Company



## silent knight (25 January 2005)

*AAC - Why the sudden burst?*

AAC have been trending up solidly for a long time now but yesterday and today saw a rapid rise in price on large volume. Is it the rains, the Free Trade Agreement, an Institutional buyer or an announcement to be made? Anyone know?


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## silent knight (16 March 2005)

*AAC..decisions to be made*

I've been impressed at some of the analysis I've seen on this forum and though I dont contribute often I keep a good eye on what's written. I find AAC's short term siuation difficult to predict and I wonder if anyone has any comments.
As a holder of AAC I face some difficult decisions over the near future. AAC go ex-rights tomorrow 17th march. They closed yesterday at 1.72, having dropped about 15c when the rights issue of one for five was announced, but rose yesterday from 1.70. The right is to buy shares at 1.65. Does anyone else have the same decisions to make? 
My guess is that the long term will be solid and, in the long term, using the rights to purchase will be profitable as the company has been in a long term upward trend. 
It is more a short term problem. I'm sure there is money to be made by buying and selling over the next month or so, if only I knew how. Does any one have ideas as to how the price of the shares, and the rights when they list tomorrow, will move short term?


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## Knobby22 (16 March 2005)

*Re: AAC..decisions to be made*

In my experience, 99 times out of a hundred you should take up the rights rather than sell them.

There will be a temporary fall in share price due to the rights issues but that will end over the next six months. If you trade them you end up paying selling and buying costs plus you are up against professionals trying to get the rights cheaper. 

Think long term and provided the company travels OK you should be well up in a years time.


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## Knobby22 (22 January 2007)

Looked at this again and bought some.

They held off the stock in the last half due to the rains being so good.

Not many people realise that while the south of Oz has been in drought, the north have been getting bumper rains.

This next report should be fantastic. Future growth looks good also.

From a technical basis, there has been a breakout.

Knobby


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## Jrowl (22 January 2007)

It's PE is around 23 I think and has a low dividend.


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## reece55 (22 January 2007)

Jrowl
Toll Holdings has a PE of 27 and a dividend yield of 2% and has gone up 100% in less than a year........ my point here is that P/E and yield are not the be all and end all of stock analysis...... AAC is a growth stock and median forecast EPS growth is almost 100% in 08 ...... Remember, it's not about how expensive the P/E ratio is, or the yield, its all about the NPV of the Company..... And if you don't want to spend 3 years at uni studying business finance, just let the chart do the talking - strong breakout of late, looking good!

Cheers


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## Knobby22 (6 February 2007)

Results are pretty good.

Revenue up substantially, meat sales up even more, I like how the specialty beef products are going.

The net profit is down due to a herd revaluation, asset valuations can generally be ignored somewhat. 
Looking at the underlying profit, it is up over 120%.

Good rains have occurred up north, so this coming year should be better.
Fundamentally it appears to me a safe hold over the coming year.

Knobby


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## sting (13 June 2007)

UP 24 cents yesterday and even after getting a speeding ticket the indicative price is up another 7 cents before the open.

One of the reasons for this is IMO the major supermarkets are now selling AAC branded beef at premium prices.

profits will be up.... rains have come ...grain prices will fall....all this is good news for shareholders

SEMPER UBI SUB UBI


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## sting (23 October 2007)

WHERE DO WE GO FROM HERE
Futuris to sell its 43% stake in AACo .... Any idas on where this will leave the SP Im sure its not in anyones interest to perform a dump and run. So does this leave AACo open to a takeover. Ive never held stock when such a large shareholder bails out. any opinions would be greatly appreciated


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## BigJohnny (23 October 2007)

sting said:


> WHERE DO WE GO FROM HERE
> Futuris to sell its 43% stake in AACo .... Any idas on where this will leave the SP Im sure its not in anyones interest to perform a dump and run. So does this leave AACo open to a takeover. Ive never held stock when such a large shareholder bails out. any opinions would be greatly appreciated




I believe the SP will be supported away from the recent lows. If there is genuine interest, 2 scenarios will happen. 1. Citigroup (their advisor), will organise a share sale/placement with fund managers/institutional funds. 2. Somebody offers to buy all 43%, which would require a mandatory takeover offer. This would work similar to GNS buying a stake in ANE, where a takeover offer followed after the share sale. Possible suitors would be Macquarie Pastoral Fund, Packer's Consolidated Pastoral Co or other smaller pastoral companies looking to increase size, Brazilian company JBS-Friboi, and Harmony Capital. Be mindful, Futuris have stated the sale will occur in this financial year 07/08, so i believe suitors will have a good look at the books, and Futuris will wait for fair value. http://bulletin.ninemsn.com.au/article.aspx?id=303702


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## Profitseeker (26 December 2007)

On the block, price of AA Co just went up

Going, going ... Brunette Downs is one of 24 cattle stations and two feedlots owned by Australian Agricultural Company. Photo: Brendan Esposito 
Email Print Normal font Large font AdvertisementAdvertisementVanda Carson 
December 20, 2007 

AUSTRALIAN Agricultural Company has increased the valuation of its massive land portfolio on the eve of a bidding war triggered by the imminent sale of a majority stake in the company.

The company told the market yesterday the value of its properties - which are mostly in the country's far north - had increased by $180 million in the past six months.

AA Co commissioned valuations of its 24 cattle stations and two feedlots after the company was effectively put on the auction block in October when Futuris announced it wanted to sell its 43 per cent stake, which was worth $344million at yesterday's close.

The properties sprawl over nearly 8 million hectares of land in Queensland and the Northern Territory.

The valuations of the independent Herron Todd White were expected to boost net tangible assets per share by about 49c to about $2.87, the company said.

Assets per share have increased by 41 per cent in three years despite a depressed cattle market and high grain prices.

The scarcity of good beef producing properties and the worldwide trend towards higher-protein diets are pushing prices to historic highs.

One AA Co property alone - Wrotham Park Station in the Queensland Gulf Country - produced an average of 14 per cent annual capital growth over the past 21 years.

The Northern Territory and Queensland have also been receiving better rainfall than southern regions, thanks to monsoon conditions over summer.

Market observers have said the assets were likely to be sold in one line.

Potential buyers include Macquarie Pastoral Fund and the local beef producer Teys Brothers as well as overseas interests such as Cargill of the US and Brazil's JBS group, which bought the meat processor Australian Meat Holdings earlier this year.

Analysts believe shareholders could receive up to $3.77 a share if a full takeover bid is made, 18 per cent up on yesterdays close.

Futuris, whose Elders subsidiary owns the stake, decided to sell because the holding was not spinning off enough cash and the company wanted to focus on its forestry and telecommunications operations.

AA Co recently moved away from selling generic meat to meatworks and into branded beef and wagyu beef for the Japanese market, as a way to increase profit margins. Its shares closed up 2c at $3.21 yesterday.


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## petamcg (3 April 2008)

I heard that because the US has just agreed to allowing the consumption of cloned beef that the US may as a result look elsewhere for natural product.  This may explain a price increase.


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## The Once-ler (12 April 2008)

Price increase?

What increase is that? Looks down to me.

Looks like the lack of rain for the non event wet season over most of AAC's properties is trending the price down. Another pathetic profit result on the way, however the land is a great asset and good buying when the share price bottoms out I think.


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## josjes (12 April 2008)

And what's going on with the planned sale of AACo by Futuris ? No buyer in sight ? Anyone knows the latest ? The price spike early in the year is just speculative froth in anticipation of good offer, but now that credit squeeze is hitting hard, private equity players are nowhere in sight.


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## sting (21 May 2008)

Just got home from the fiasco that was the AGM. Ive seen Nigerian scam artists with more morals than some people who attended the meeting today.

My opinions aside...the outcome

The charman sacked and the 2 othe independant directors resign.

Interesting point raised AACo is currently undergoing a "SUBSTANTIAL" claim against ELDER's (read FUTURIS) against a food additive issue. Now that there are no independant board members only Futuris representatives I wonder what will happen with the claim now.

Also strong rumour raised was that an offer was made to futuris for their 43% holding on condition the board reccommended a takeover of the other 57%. Takeover offer price was $3.50. Futuris board members refused to confirm or deny the rumour and despite the question put to Les and co about what their plans for the future of their stake they refused to answer.

Read into this what you like but I would hate to see Australia's longest Agricultural Co disappear or become owned by oversea's interests


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## michael_selway (21 May 2008)

sting said:


> Just got home from the fiasco that was the AGM. Ive seen Nigerian scam artists with more morals than some people who attended the meeting today.
> 
> My opinions aside...the outcome
> 
> ...




Hm interesting, so look like bad management

*Earnings and Dividends Forecast (cents per share) 
2007 2008 2009 2010 
EPS 1.4 4.5 6.6 9.5 
DPS 9.0 7.0 7.0 7.0* 

thx

MS



> Date: 21/5/2008
> Author: Clancy Yeates
> Source: The Sydney Morning Herald --- Page: 27
> The re-election of Australian Agricultural Company (AACo) chair NickBurton-Taylor will be opposed by 43% shareholder Futuris. AACo has indicatedboard members Greg Paramour and Chris Roberts will resign in protest ifBurton-Taylor's re-election is opposed by Futuris. The cattle producercould potentially lose four of its six directors at once, with former deputyprime minister, Tim Fischer, ending his term on the board. Futuris recentlyattempted to divest its holding in AACo, but could not find a suitable buyer
> ...


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## sting (21 May 2008)

Not bad management on behalf of theoutgoing board...sp has risen about 33% in just over a yr. Profits are up. 

What some people fail to realise is that Agriculture Co.'s are not going to pay big dividends as they are dependant upon seasonal weather changes, where this company like others in this sector is in its land valuations.

this end of yr results

EBIT up39%

Gross assets up 23% 

Sales up 36%

herd increase up 5.7%

Calving up to 74% up from 71% the previous yr

Paid a dividend of 9 cents over the yr which is 3% of the share price

Micheal if you think that that is bad management I must hold some real dogs in my portfolio as very few can compare to the above figures.

to make a fair comparasion

in the last 5 yrs 

AAC share price rose from 90 cents to $3.00

FCL has risen from $1.75 to 1.85


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## Max_ob (22 June 2008)

anyone still in this stock. . . . 


it seems to be in freefall and not sure why. . . . can anyone offer some insights on what is going on as it seems more than just dropping with poor overall market performance. . .


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## Tysonboss1 (23 June 2008)

Max_ob said:


> anyone still in this stock. . . .
> 
> 
> it seems to be in freefall and not sure why. . . . can anyone offer some insights on what is going on as it seems more than just dropping with poor overall market performance. . .




Part of it could be oil price related,

It's expensive to transport cattle to market..............................

"AAC is one of Australia's largest beef producers. While AAC experiences highly volatile cashflows, its extensive land and cattle holdings create wealth and provide investors with direct exposure to cattle and land price movements. Therefore, dividends will be minimal. Takeover speculation has pushed the share price to levels at which we advise taking profits. We have a negative long-term view.

We view AAC as an asset play rather than a cash generating, dividend paying type investment. Re-entry of the US into Japan and Korean markets may adversely impact AAC’s export earnings. Earnings are also subject to the seasonal conditions. FCL has terminated the sale process for its 43% holding in AAC, which may trigger a short-term run on the stock. We hold a negative 12-month view on AAC.
"


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## brettc4 (8 July 2008)

AAC dropped 8% today, but I have not seen any news which may explain this.

Has anyone heard anything???

Brett


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## Taltan (3 December 2009)

Seems to be reaching new lows lately, does anyone know why? Given their landholdings it looks a bargain. I know there's no profit but thats cause land revaluations don't hit profits, so seems to me it should be higher. Does anyone have any ideas why the recent downturn?


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## copashark (31 December 2009)

Im punting on a upswing for AAC, their greatest assests are the land and the stock. Given recent soaking rain, and short term forecasting over some of their holdings, the pasture crop should be value added and their stock should be value added as beef producers look to re-stock their land after the prolonged dry and stock sales.


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## GumbyLearner (4 May 2010)

I wonder if this fella can make this stock lift???
Still selling steak and flipping burgers in Japan, Korea & China.
Most of the Qld drought broken.

Let's wait and watch! 

http://www.theage.com.au/business/extelstra-boss-mcgauchie-to-run-aaco-20100503-u3qa.html

FORMER Telstra chairman Donald McGauchie will become chairman of Australian Agricultural Company in coming months and steer it through a shift from beef production to processing and marketing.

The company said yesterday that Mr McGauchie would join the board at the annual meeting in two weeks, replacing Peter Hughes, and assume the chairmanship from Nick Burton Taylor three months later.

''I have been fully briefed on the recent strategic review at AAco, including the new initiatives in cattle marketing, beef processing and cattle breeding programs,'' Mr McGauchie said yesterday. AAco shares closed yesterday at $1.30, steady on Friday's close but down from $1.83 a year ago.


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## knightofsx33 (4 May 2010)

well I wouldnt count on a guy that has his company share price going downward for the past 10 years to shift something that someone else couldnt


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## GumbyLearner (4 May 2010)

knightofsx33 said:


> well I wouldnt count on a guy that has his company share price going downward for the past 10 years to shift something that someone else couldnt




do you think he's short or ready for a cap raise top-up?
I noticed he was also a NUF director. They don't seem to have done so bad while he was on the board. I honestly dunno about this one.

DYOR


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## copashark (25 May 2010)

Sp now back back to 1.52 and has had a slow and steady rise over the. Last couple of months. Beef prices are still low, but high lamb price(alternate protein) gives  beef more backbone. No profit guidance for this year does not help one in making investment decisions. Good growing conditions in the barkly tablelands may bring a more positive result.


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## malachii (5 October 2010)

Anyone know why this one has gone pear shaped over the last few days????  I haven't seen any announcements and the weather hasn't been bad up north that I'm aware of and cattle prices are doing OK at the moment.  I guess the $ is hurting them but I didn't think it would hurt this much.  Any comments?????


malachii


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## So_Cynical (5 October 2010)

malachii said:


> Anyone know why this one has gone pear shaped over the last few days????  I haven't seen any announcements and the weather hasn't been bad up north that I'm aware of and cattle prices are doing OK at the moment.  I guess the $ is hurting them but I didn't think it would hurt this much.  Any comments?????
> 
> 
> malachii




I imagine a large percentage of there revenue comes from live exports into SE Asia so yep the dollars hurting them...there's alot of A Dollar export sensitive stocks hurting, same with stocks that have high USD earnings.


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## copashark (4 January 2011)

Trading halt announced.. any idea's? perhaps further damage relating to the floods in QLD??


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## tge oracle (10 May 2011)

Today's Cap Raising has provided an opportunity for investors without exposure to purchase shares at , what I consider to be, a fair price.
The outlook for beef consumption and sales is very positive for the foreseeable future.
This Cap Raising will position AAC on a firm footing financially by providing funds for expansion and reducing debt.


Disc. - I am invested in AAC.


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## Taltan (16 May 2011)

Is there a retail SPP coming? if so does anyone know when and how much etc? If not it seems a but unfair to be diluted if things are supposedely going well


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## tinhat (17 May 2011)

Taltan said:


> Is there a retail SPP coming? if so does anyone know when and how much etc? If not it seems a but unfair to be diluted if things are supposedely going well




here


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## tge oracle (23 May 2011)

According to Elders the livestock ( cattle ) supply is tightening. I would expect this to have a positive impact on AAC as they are Australia's largest cattle producer and will benefit from this tight supply which should lead to higher cattle/beef prices.


Disc - Invested in AAC.


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## pixel (22 January 2013)

At last: Support and break out of falling channel. I got set last Friday.


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## Garpal Gumnut (22 January 2013)

pixel said:


> At last: Support and break out of falling channel. I got set last Friday.
> 
> View attachment 50543




Thanks pixel, 

I may get set in this myself.

A weekly confirming a recent support level.






gg


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## pixel (20 February 2013)

Target reached. I'm off.
New alert set for $1.26.


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## brettc4 (25 September 2013)

The Retail Offer of 7 for 10 @1.00 has been released. AAC plan on completing the build of their Darwin Abattoir but as far as I can see, the bulk of this raising is to reduce debt.

What do people think of this offer?

Brett


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## pixel (26 September 2013)

brettc4 said:


> The Retail Offer of 7 for 10 @1.00 has been released. AAC plan on completing the build of their Darwin Abattoir but as far as I can see, the bulk of this raising is to reduce debt.
> 
> What do people think of this offer?
> 
> Brett




I had bought back in recently, but sold most of it back after the offer was announced. 
The reason/s:
I wouldn't want to add 70% to my holding, so it's better to free up the cash beforehand.
I can now wait and decide whether to buy into the offer, having essentially shorted from $1.10 with a guaranteed buy-back of $1 (or less, should the price drop further.)


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## pixel (17 October 2013)

pixel said:


> I had bought back in recently, but sold most of it back after the offer was announced.
> The reason/s:
> I wouldn't want to add 70% to my holding, so it's better to free up the cash beforehand.
> I can now wait and decide whether to buy into the offer, having essentially shorted from $1.10 with a guaranteed buy-back of $1 (or less, should the price drop further.)




Back on a full position now, and despite low volume around current (resistance) levels, the momentum is pointing upwards.


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## lclfze (20 October 2013)

I bought my entitlement only with intention of selling straight away for a modest profit.

However I'm reconsidering because the major shareholder (AA Trust, an investment vehicle of Joseph Lewis i.e. Tavistock Group) is now at 19.99% plus he has stumped up a lot more for some preference shares at a relatively low interest rate to allow AAC to finish off its Darwin abattoir.  If all the prefs were converted (subject to 3% every 6 months creep rule), Tavistock would have nearly 30% of AAC.

Plus AAC is trading 62% of book value, so if broken up/taken over could be worth a lot more.  Takeover might be Tavistock's intention.


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## pixel (14 November 2013)

It's been a slow crawl, but it seems today could be THE DAY. I hold a full posi and reckon I'll top up on breakout.





"Feed the Man meat." and that is no Bull


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## keithj (15 November 2013)

pixel said:


> It's been a slow crawl, but it seems today could be THE DAY. I hold a full posi and reckon I'll top up on breakout.




Looks like y'day *was* the day... with breakout today. Is it takeover talk, re-rating based on recent results/lower debt levels or something else ?


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## pixel (18 November 2013)

keithj said:


> Looks like y'day *was* the day... with breakout today. Is it takeover talk, re-rating based on recent results/lower debt levels or something else ?




I don't know or care what caused it.
As long as it holds above Fib Phi (161.8%), I keep adding


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## pixel (22 September 2014)

Does anybody have an explanation for today's rally?
I did notice Friday's attempted breakout, but wasn't game to commit; today took me completely by surprise, and I've been waiting for an ASX speeding ticket or a "Notice received". So far ... Nothing


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## Knobby22 (22 September 2014)

There is a lot of money leaving China and a lot of it is going on farm land. I would not be surprised to see a foreign takeover.


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## rcm617 (22 September 2014)

pixel said:


> Does anybody have an explanation for today's rally?
> I did notice Friday's attempted breakout, but wasn't game to commit; today took me completely by surprise, and I've been waiting for an ASX speeding ticket or a "Notice received". So far ... Nothing
> 
> View attachment 59502




Central Queensland has had some good rains over the last couple of days, which is likely to push cattle prices up. Large cattle growing area that has been in drought for a few years.  They also have a few stations in this area.


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## qldfrog (22 September 2014)

rcm617 said:


> Central Queensland has had some good rains over the last couple of days, which is likely to push cattle prices up. Large cattle growing area that has been in drought for a few years.  They also have a few stations in this area.




how would better rain increase the revenue of AAC (export mostly..)?
yes they wuill have feed all good indeed but probably more important as I see it:
 the AUD is falling; every % fall is extra % competitivity/revenue


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## rcm617 (22 September 2014)

qldfrog said:


> how would better rain increase the revenue of AAC (export mostly..)?
> yes they wuill have feed all good indeed but probably more important as I see it:
> the AUD is falling; every % fall is extra % competitivity/revenue




I think you will find that the vast majority of AAC's cattle still are for domestic supply. Breaking of the drought causes less cattle to be supplied to the market and thus pushes up prices. I agree the dropping dollar will also help, but that has been happening for a little while, so less likely to be specifically the rise today.


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## tge oracle (14 October 2015)

An interesting article from today’s Australian reports on the impact “ El Nino “ will have on agricultural commodities and more importantly commodity prices.
This is as a result of weather related supply shortages. I hadn’t considered the effect of “ El Nino” , however, I consider it to be another event akin to a favourable macro-economic event such as the falling AUD.

TO read the full article, follow the link below. 
I have also quoted one of the more relevant sentences in the article for your consideration:

Quote; 

“ Several agricultural prices have rallied off their lows on fears of weather-related supply shortages. Sugar prices have risen 31 per cent over the past three weeks; dairy is up 36 per cent, palm oil has gained 13.1 per cent and wheat is up 6.1 per cent over the same *period.”


http://www.theaustralian.com.au/bus...-nino-takes-hold/story-fnay3ubk-1227567903112


Disc – Opinion only. Invested in MGC, CGC, AAC and WBA. DYOR.


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## qldfrog (14 October 2015)

it is to take into account but sadly, we in Oz will bear the worst of an el nino event: higher commodity price, lower productivity for us;
My own 2c is that it is a negative for AAC
I own some AAC shares


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## tge oracle (27 October 2015)

This article is from today's Australian newspaper:



CHINA GIANT COFCO LOOKING AT BEEF, DAIRY SECTORS 
THE AUSTRALIAN OCTOBER 27, 2015 12:00AM


China’s biggest food company, Cofco, plans to look at investments in the Australian dairy and beef industries as it moves to *become the face of China’s transformation of its biggest state-owned enterprises into globally competitive corporations.

Cofco president Patrick Yu told a private roundtable forum in Melbourne, hosted by the Australian not-for-profit The Global Foundation, that Cofco was at the forefront of SOE reform and that more partnerships with Australian companies would help drive its new global, commercially *focused mandate.

“For us it is very important to build a supply chain by working together with our partners. We are becoming a global citizen. We are not just a Chinese company any more,’’ Mr Yu told the forum during a rare visit to Australia.

In unusually frank comments for the CEO of a top government-backed Chinese enterprise, he *acknowledged it was challenging for an SOE to become more *market-oriented.

But he said the Chinese government planned to delegate more power to the commercial platform of Cofco and that his company’s “systems’’ were starting to change as a result.

He said Cofco’s management team and staff were learning to balance the demands of playing by global rules on the global stage while at the same time growing a local identity in the areas in which it operates, noting it “wasn’t easy”.

“While we have to be globalised, we also have to be in the local circle. You have to work closely with local industry, local people.”

Cofco ”” or China National Cereals, Oils and Foodstuffs Corporation ”” is one of the largest SOEs of the 49 directly administrated by China’s State Council.

Last year it was one of a handful of enterprises chosen by the authority to lead reforms of the SOE sector after a string of poor international investments by SOEs led to huge losses across a range of sectors in recent years.

As China’s largest food *processing, manufacturer and trader, Cofco has bought several smaller domestic firms in recent years. Then last year it made its *biggest steps onto the global stage with $US2.7 billion to acquire Dutch grain trader Nidera and 51 per cent of Noble Group’s agriculture unit, giving it new pathways into South America and central Europe.

In the interim, in 2011 it made its first acquisition in Australia, paying $145 million for Tully Sugar in Queensland, which *supplies 10 per cent of Australia’s annual sugar crush.

Mr Yu said Cofco had learned plenty from its ownership of Tully that it was applying to other parts of its empire, including sending its Tully Sugar farming expert to Brazil in a bid to reduce the company’s sugar chain production cost from its South American operations.

Mr Yu added that Australia remained a prime target for investment.

“With Chinese consumers, today people are strongly aware that Australian food and agricultural products are safer, good *quality, good products, good innovation to the China market,’’ he told the forum.

“We should have some local partners in Australia. Victoria is very strong in the dairy sector so we should look into that. The other area is protein ”” I think beef is the next potential area for Australia to China. Australia is in the best position for fresh produce.”

The Australian beef market is enjoying record high prices driven by increased demand from Asia for live cattle and boxed beef.

Last year, Cofco signed a memorandum of understanding for a landmark Asian Food Partnership with the Global Foundation.

It set the terms and understanding between the two for *mutual co-operation in contributing to an Asian Food Partnership and to global food security.

“I believe that with the support of the Global Foundation, Cofco can have the chances and opportunities to grow our business not only in Australia, but elsewhere,’’ Mr Yu said. “We can bring China demand and Australian suppliers into China and Australia will *become much stronger trading partners in the long run.’’

The Global Foundation is *already working with National Farmers Federation chief executive Simon Talbot, who attended the Melbourne forum, to forge relationships with the food-focused parts of Cofco.

Cofco has four companies listed in Hong Kong: China Foods, China Agri-Industries Holdings, Mengniu Dairy and Cofco Packaging Holdings.

“We are putting a team around Simon that develops an innovation centre for SMEs to better understand the China market and work with Cofco as partner,’’ said Global Foundation secretary-*general Steve Howard, who will visit Mr Yu again in *Beijing early next month.

But Mr Yu said the partnership with the Global Foundation could also extend into other sectors.

“There is (also) much more *potential for the Global Foundation to bring together players in the healthcare and education industries,’’ he said.

The Foundation’s Asian Food Partnership with Cofco is also complemented by a focus on *supply chains and export infrastructure, which has been led by Aurizon CEO Lance Hockridge over the past 18 months.

Mr Hockridge plans to take a team to China in the coming months to meet with Cofco to examine the company’s supply chains and distribution systems.


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## Ves (4 December 2015)

Have taken a position in AAC this morning.

This is a company that has and is still undergoing a major transformation. AACo has traditionally been a grazing company that bred and produced beef cattle for the purpose of live sales. This line of business has always been highly volatile and correlated to the supply/demand in the market, live cattle export quotas, cattle prices,  weather conditions etc.,  and pricing trends within the entire supply chain.

However, the company is squarely on the path towards vertical integration and branded boxed beef sales.  Boxed beef sales made up 84% of revenues in the last half, compared to 47% in the year of 2012 (and far less in the years before that).

This has required a large working capital injection to build the herd & also to build a processing facility / abbatoir in Darwin.

Most of the capital ramp up has now finished and cash flow will be starting to build up.
The geographic isolation of the new Darwin processing facility (vs the east coast processing facilities) gives it a potential competitive advantage and heaps of room to expand it. It also substantially decreases their earnings volatility (as there is no longer a reliance on live cattle price, which are far less stable than finished meat prices).  The facility has almost reached capacity on the first shift and is now profitable.  Given the nature of the fixed cost base, any extra capacity they can fill will start hitting the bottom line in far greater numbers. Eventually they will add a 2nd twelve hour shift, effectively doubling capacity.

Margins will improve once they are using their own cattle in the facility rather than contracting out to other farmers.  It will also assist in managing capacity in times when supply of external cattle is low (something that traditionally makes meat processing companies unprofitable for periods).

Vertical integration in the beef industry is uncommon (compared to say pork or poultry) but the rewards are very big indeed if you get the cost structure and supply chain management correct.

The macro picture for food (especially in Asia) and also high quality beef products (Europe) in the very long term looks excellent to me. The TPP and other trade treaties should help free up a lot of these markets.

I also like the fact that they are exposed to the high value, high margin (non-Japanese) Wagyu markets, which seem to be far easier to turn a profit in Australia as it is easier to compete on costs with the US, UK etc.

Lastly, there is also a bit of a technological revolution in agriculture (especially live / timely data) that will greatly assist the remote management of livestock herds and improve data quality and quantity.

Interesting company,   will be plenty of tough years to ride through, and probably some heavy share price movements from time to time,  but potentially decent rewards for long-term patience.


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## craft (26 May 2016)

Ves said:


> Have taken a position in AAC this morning.
> 
> This is a company that has and is still undergoing a major transformation. AACo has traditionally been a grazing company that bred and produced beef cattle for the purpose of live sales. This line of business has always been highly volatile and correlated to the supply/demand in the market, live cattle export quotas, cattle prices,  weather conditions etc.,  and pricing trends within the entire supply chain.
> 
> ...




Looks like they are starting to get some recognition from the market after yesterdays Report.


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## Ves (26 May 2016)

I can only imagine what cash flow / earnings will look like when the following happens:

1.  More long-term:  The proportion of AAC bred cattle that goes into the abattoir increases substantially and they don't have to buy expensive cattle bred else where.

2.  More eminent:  The abattoir finishes its ramp-up and operates at full-capacity. Due to high fixed costs being carried,  a lot more falls to the bottom line.

Still a super long-term,  ride the bumps kind of play.  But exciting progress so far. 

A fully vertically integrated processing plant,  some time in the distant future, where most of the capacity is taken up by their own cattle to achieve much higher margins (obviously needs a much larger herd and heaps more farm land),  that can benefit from increased food demand across the globe is where I am looking.


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## McLovin (26 May 2016)

Ves said:


> Vertical integration in the beef industry is uncommon (compared to say pork or poultry) but the rewards are very big indeed if you get the cost structure and supply chain management correct.




Do you know what the reason for that is? You're painting a pretty good picture, but I'm sort of scratching my head thinking why hasn't anyone else thought of vertical integration. Higher margin, less volatile pricing. Seems like a no-brainer. Is it too complex to ensure supply, given the vagaries of weather etc, without a geographically diverse head of cattle?


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## Ves (26 May 2016)

McLovin said:


> Do you know what the reason for that is? You're painting a pretty good picture, but I'm sort of scratching my head thinking why hasn't anyone else thought of vertical integration. Higher margin, less volatile pricing. Seems like a no-brainer. Is it too complex to ensure supply, given the vagaries of weather etc, without a geographically diverse head of cattle?



Have a read of this mate:

http://ageconsearch.umn.edu/bitstream/35759/1/waeasp21.pdf

It's from 1997,  but I think it provides a very good introduction of the differences between the poultry, pork and beef (cattle) segments and the implications on vertical integration and why it has occurring much slower in terms of the cattle industry.

I reckon the technology and understanding of genetics has come on a lot in the last 20 years,  and also the wider awareness in society of different types of beef (wagyu,  angus etc).


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## McLovin (27 May 2016)

Ves said:


> Have a read of this mate:
> 
> http://ageconsearch.umn.edu/bitstream/35759/1/waeasp21.pdf
> 
> ...




Thanks. So specialisation was the name of the game, because farms tended to be dispersed, and each stage of production needed to get volume through to be economical. I'm guessing AAC have the scale that they are not affected by things like drought etc in the way a smaller operation is? 

How do the pastoral leases work? Are these for a set period of time and then renewed for a nominal amount, or for market value or....They're not amortised as far as I can see. 

Is there some sort of metric around "land utilisation" that you know of, like how many more cattle could they put on their existing property without negative affects? You mention they have plenty of capacity at their new Darwin processing facility, will this be used exclusively for AAC or will they also provide contract services?

The strategy seems to be providing premium beef, and to that end they look to have really upped their wagyu herd. No doubt those genetics and breeding take years to perfect, given the long breed cycle of cattle. Is there a risk that they have pinned a lot of their success on a single type of beef and that customer taste may change (next fad diet says eat lean red meat etc)?

Lots of questions, just thinking this through.


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## Ves (27 May 2016)

McLovin said:


> Thanks. So specialisation was the name of the game, because farms tended to be dispersed, and each stage of production needed to get volume through to be economical. I'm guessing AAC have the scale that they are not affected by things like drought etc in the way a smaller operation is?



They might have a bit more financial clout, and possible some advantage if the drought affected QLD and not NT, or vice versa, but probably not any notable advantage.

I think you’d have to expect a few bad years along the way, that’s for sure.

Some background on all of the properties here:

http://www.aaco.com.au/operations/properties/

They do claim the breeding stations are located in “safer” rainfall areas. I guess you could probably confirm/deny and measure the risk with climate data,  but I really haven’t dug that deep.



McLovin said:


> How do the pastoral leases work? Are these for a set period of time and then renewed for a nominal amount, or for market value or....They're not amortised as far as I can see.




Page 61 of the Annual Report is what you are looking for.
http://www.asx.com.au/asxpdf/20160525/pdf/437gfsvfnqhp1j.pdf

Basically they are leased from the State Government (NT/QLD).    NT are perpetual leases, whilst QLD are 50 year leases.  I don’t see much risk of the QLD leases not being rolled over,  there’s not much else they can do with the land.



McLovin said:


> Is there some sort of metric around "land utilisation" that you know of, like how many more cattle could they put on their existing property without negative affects?




I’m not really sure, but I would imagine, given the ramp-up in stock in the last few years, they wouldn’t leave any spare capacity.  My assumption is to expand they would need more leases.



McLovin said:


> You mention they have plenty of capacity at their new Darwin processing facility, will this be used exclusively for AAC or will they also provide contract services?




They haven’t been as clear in their disclosure of the activities of this facility in this report (compare the previous few halves and they had a nice capacity chart etc.)

From Page 9 of the 2016 Annual Report (link above) it says they slaughtered 217,800 during that financial year. Also looks like they purchased 95k live cattle (not sure how the accounting works here,  but does this include cattle purchased for slaughter on a contract basis? Probably not)

Capacity is about 1,000 head a day, or around 365,000 (this was in the strategy updates when the new facility was announced to the market a few years back.

They definitely contract this facility out (confirmed in previous presentations), but ideally they would have an overall higher margin if they can increase the proportion of their own livestock that goes through the facility.



McLovin said:


> The strategy seems to be providing premium beef, and to that end they look to have really upped their wagyu herd. No doubt those genetics and breeding take years to perfect, given the long breed cycle of cattle. Is there a risk that they have pinned a lot of their success on a single type of beef and that customer taste may change (next fad diet says eat lean red meat etc)?
> Lots of questions, just thinking this through.




I don’t think Wagyu is so much a fad diet as it is a high quality luxury product (some reports say it’s actually healthier because it has higher unsaturated fats).

If anything the risk has more to do with not enough people being able to afford to eat it than there is eating trends changing IMO.


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## qldfrog (27 May 2016)

Ves said:


> Basically they are leased from the State Government (NT/QLD).    NT are perpetual leases, whilst QLD are 50 year leases.  I don’t see much risk of the QLD leases not being rolled over,  there’s not much else they can do with the land..



The obvious alternative choice is havland given back to aboriginal corporations, sorry land councils.
A matter of state governments and whoever is in power at the time;


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## peter2 (24 April 2017)

The weekly chart (left) shows the completion of the corrective abc pattern. The pattern ended a little below the targeted 50% - 61.8% levels. However the CD=AB price projection hit it right on.

The completion of the corrective pattern provides the context and we wait for our setups to provide an acceptable RR opportunity.

Our trend continuation pattern has formed on the daily chart (right)and the initial target of 1.97 (old high) provides an acceptable RR.


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## mullokintyre (6 September 2021)

Seems no one interested in AAC anymore.
Been on a steady upward trend since May.
Up 7% today, probably due to the announcement that Brazil has closed its exports to china due to an outbreak of "mad cow Disease".
Probably too late for this one now.
Got a low ball bid at 1.38 just in case.
Mick


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## qldfrog (6 September 2021)

Maybe too many people with my experience
Started building a base portfolio years ago
Woolies and coles, coal, oil with woodside, minerals with min, agriculture: gnc and aacyou then see your portfolio at best lag the rest.. and give up.
I do not know why exactly anymore but now i have a perception of a very crappy management.
I like beef, and will probably enter as a nice boutique producer if we can stay on oz.


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## dyna (6 September 2021)

Yeah, hopeless management has to be a big part of Aarco's poor performance. It's been like this for years. They got the Rudster's daughter on board, for a China connection, I guess. She was quite happy to take the  dough for attending a handful meetings each year but never held a single share until quite recently.


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## frugal.rock (6 September 2021)

mullokintyre said:


> announcement that Brazil has closed its exports to china due to an outbreak of "mad cow Disease".



Wonder what's gonna happen to this boat on its way to Nam...
Handbrake you turn? 14,000 head supposed to arrive later this month...









						Local exporters on alert as Brazil sends cattle to Vietnam in live trade first
					

Australia's live export industry is closely watching an historic first shipment of 14,000 bulls from Brazil to Vietnam, Australia's second biggest customer for live cattle.




					www.abc.net.au


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## divs4ever (6 September 2021)

dyna said:


> Yeah, hopeless management has to be a big part of Aarco's poor performance. It's been like this for years. They got the Rudster's daughter on board, for a China connection, I guess. She was quite happy to take the  dough for attending a handful meetings each year but never held a single share until quite recently.



 i glanced at this a few times  over the years   but could never crunch  the figures to attract me .

 maybe if AAC had of signed up Rudd's wife , it may have got better value for share-holders 

 if i made a new buy into the agricultural sector , i think i would prefer NAM or SGL(LV )  , although if cheap enough SHV  would be attractive as well , for me to return to holding them 

 currently i prefer to hold D2O and RFF  exposure with less pain ( or potential reward )

 BTW i see China playing 'hard-ball' with meat imports from Australia


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## divs4ever (6 September 2021)

frugal.rock said:


> Wonder what's gonna happen to this boat on its way to Nam...
> Handbrake you turn? 14,000 head supposed to arrive later this month...
> 
> 
> ...



since Vietnam  is buying BULLS that implies breeding/cross-breeding  , to improve the local herds  , would the Vietnamese cull any sick animals and stick to the program  ( i suspect so )

 it might be worth watching for reports on the source of the disease  , the Vietnamese might circumvent the problem using local feed on the healthy imports


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## mullokintyre (18 November 2021)

AAC continuing to go higher.
Yesterday was listening to a stock agent complaining about the ridiculous (to him anyway) prices of cattle. 
victorian Eastern Young cattle Indicator at all time highs of 1137.
Hope it stays this high for a while as we have some steers to off load.
Market for heavy steers has already come off a bit.
Expect them to likely fall from mid December when all the northern Abattoirs close down for a month or so, the pick up again from Feb as they come back online.
Might take profits now and look to come back in the new year.
Mick


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## Porper (18 November 2021)

mullokintyre said:


> AAC continuing to go higher.
> Yesterday was listening to a stock agent complaining about the ridiculous (to him anyway) prices of cattle.
> victorian Eastern Young cattle Indicator at all time highs of 1137.
> Hope it stays this high for a while as we have some steers to off load.
> ...



Getting smashed back now. 

Big intraday turnaround. I hold but will likely sell just before close unless price is well off the lows.


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## mullokintyre (18 November 2021)

Sold out.
Should have taken my own advice earlier in the day.
Still a smaller profit is better than a small loss.
Mick


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## Garpal Gumnut (18 November 2021)

Porper said:


> Getting smashed back now.
> 
> Big intraday turnaround. I hold but will likely sell just before close unless price is well off the lows.





mullokintyre said:


> Sold out.
> Should have taken my own advice earlier in the day.
> Still a smaller profit is better than a small loss.
> Mick



I don't know. 

This was a surprise to me. The price is like a mad aunt.

I think I'll stay on the sidelines, hold and not get out until she shows herself either ends up with the squire or the tinker.  

For the moment that is. 

gg


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