Retailers lag behind farm prices
Shoppers can expect to pay more for food as rising farm commodity prices affect manufacturers and retailers, says a new ANZ Banking Group report.
The Agri InFocus commodity report showed Australian retail food prices have, until now, increased by a modest five per cent since 2010 because a relatively high Australian dollar and lower oil prices aided the affordability and accessibility of food imports.
“However, as production costs continue to rise, combined with a potentially lower Australian dollar, it’s unrealistic to expect manufacturers and retailers to absorb costs or use more affordable imports to maintain lower prices,” said ANZ’s agribusiness head, Mark Bennett.
“We expect consumers to be paying more for food in the coming years.”
The report also noted higher price growth for electricity and housing, and relatively strong growth in retail food prices in other countries from the Organisation for Economic Co-operation and Development.
Australian Bureau of Statistics data showed farmgate prices no longer aligned with retail prices, emphasising the challenges food manufacturers and retailers faced.
Despite a 30 index point rise in on-farm production values, retail prices had only grown five index points since 2011.
For example, significant saleyard price gains had not been fully passed on to red meat consumers, consumers, but absorbed by the supply chain.
ANZ said since 2014 Australia’s food manufacturers and retailers had been pressured to maintain shelf prices due to growing domestic and global competition and had cut their margins to maintain customers.
Duxton Farms debut
After a stalled start to its planned January listing on the Australian Securities Exchange, NSW grain property owner Duxton Broadacre Farms has made sluggish share market progress, despite a strong float on February 8.
Duxton Farms, an offshoot of Adelaide-based Duxton Water, leases one farm and owns two holdings in the Forbes-West Wyalong area of Central West NSW, valued about $58 million.
The properties “Merriment”, “Yarranlea” and “Wyalong” grow wheat, barley, canola, pulses and irrigated summer crops, including maize and cotton, and run livestock.
Duxton wants to invest in more broadacre country and diversify into farm management.
It raised about $21m in an initial public offer and issued 14 million shares at $1.50 a share, but after jumping to $1.58 when trading began the price has trended between $1.54 and $1.57.
The company is chaired by co-founder of Duxton Capital, Ed Peter, with Forbes farmer, Tony Hamilton, its managing director and Grain Producers South Australia president, Wade Dabinett also a director.
Fairfax half-year result
Newly-listed property classifieds business, Domain, and Fairfax Media’s more traditional radio division have posted strong performances to help the company lift underlying half-year earnings, despite a 54 per cent profit drop to $38.5 million.
Profits were dented by $38.7m in non-cash write-downs of ageing print equipment and the value of Macquarie Media's radio licences.
Revenue also fell 3.9pc compared to the same period in 2016-17 to $877.1 million.
Fairfax Media owns Australia’s big stable of weekly state-based agricultural publications and a national spread of regional newspapers and websites, plus metropolitan newspapers, The Age, Sydney Morning Herald and The Australian Financial Review.
Excluding significant items, earnings before interest, tax, depreciation and amortisation before significant items was up 1.3pc to $146.9m and underlying net profit slipped 9.9pc cent to $76.3m.
"This is a good result. It shows the solid performances of our businesses – virtually across the board – and demonstrates the strength of our portfolio," said Fairfax chief executive Greg Hywood.