Emerald Knight

Shares in Australian farms ‘to keep outperforming’  

• 9th November 2010
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As prices for most commodities undergo a period of rollercoaster rises and falls, analysts in Australia have predicted that money invested in stock in agricultural businesses will return 34 per cent over the next 12 months, far higher than predictions for other Australian shares.

In what has traditionally been considered an investment with relatively modest returns, such a return would be a continuation of recent performance of similar shares. In the July to September quarter, Australian farm sector shares provided investors with a return, including dividends, of 21 per cent compared with an average of eight per cent for the country’s top 200 stocks.

This recent performance has, analysts said, been spurred by takeover activity in the sector, high commodity prices and ‘bumper’ seasonal conditions which have seen the eastern states on course for one of their best grain harvests on record. This combination of factors is likely to see stocks in Australian agribusinesses pushed higher over the next 12 months, according to Brendan White, of the Commonwealth Bank of Australia.

The one note of warning from the market analysts came in the form of potential issues caused by the rising strength of the Australian Dollar. The currency has risen above parity with the US dollar in recent weeks to its highest levels in 28 years, which could have a negative impact on export prices for grain.