I think we will within the length of a generation see the end of the Packer Dynasty. The younger James Packer is preparing to sell his agricultural assets at a time when he should be buying. There are several reasons why these agricultural assets are valuable:
1. Changing diets - increasing meat consumption
2. Shortage of protein sources, particularly fish
3. Competition for feedlot feed - you might think this will undermine margins, but I would suggest it will justift greater investment in water reticulation schemes
4. Rising rainfalls in Northern Australia - where the Packer properties are located
5. Excellent food market fundamentals
6. Great $AUD outlook - subdued for 4-5 years due to weak metal prices, high debt levels
7. Inflation hedge
8. Great opportunities to buy out other homesteads at low margins
9. Great opportunity to globally integrate food delivery services
I would suggests the canny London investors who are buying out Australian food producing assets know something that Packer and his advisors know, aside from the benefit they enjoy buy buying at a time of a weak AUD. Of course this is probably the 'short term' reason Packer is selling too since current revenues will be much improved. But is he factoring in a weak AUD for several years? High food prices? Higher rainfalls in North Australia over 5 decades? Increased consolidation and securitisation of farm assets? Increased globalisation of farm output? This last trend might be thwarted by quarantine issues, but the rest are already 'on-trend'. But this is not the best of it. He is missing out on the rising value of these properties, even if the weaker AUD will increase the local revenue value.
Well we don't have to worry about seeing the Packers on the unemployment lines just yet.
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Andrew Sheldon www.sheldonthinks.com
1. Changing diets - increasing meat consumption
2. Shortage of protein sources, particularly fish
3. Competition for feedlot feed - you might think this will undermine margins, but I would suggest it will justift greater investment in water reticulation schemes
4. Rising rainfalls in Northern Australia - where the Packer properties are located
5. Excellent food market fundamentals
6. Great $AUD outlook - subdued for 4-5 years due to weak metal prices, high debt levels
7. Inflation hedge
8. Great opportunities to buy out other homesteads at low margins
9. Great opportunity to globally integrate food delivery services
I would suggests the canny London investors who are buying out Australian food producing assets know something that Packer and his advisors know, aside from the benefit they enjoy buy buying at a time of a weak AUD. Of course this is probably the 'short term' reason Packer is selling too since current revenues will be much improved. But is he factoring in a weak AUD for several years? High food prices? Higher rainfalls in North Australia over 5 decades? Increased consolidation and securitisation of farm assets? Increased globalisation of farm output? This last trend might be thwarted by quarantine issues, but the rest are already 'on-trend'. But this is not the best of it. He is missing out on the rising value of these properties, even if the weaker AUD will increase the local revenue value.
Well we don't have to worry about seeing the Packers on the unemployment lines just yet.
------------------------------------------------
Andrew Sheldon www.sheldonthinks.com
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