The listed agribusiness sector has recorded its third consecutive month in positive territory, according to recently-released data by the Commonwealth Bank.
The June Commonwealth Bank Agri Indicators Report states the Agri Index returned 19.1 per cent over the past three months.
It says that during the past month, the sector delivered a total return of 1.0 per cent, its third consecutive month of positive performance.
Commonwealth Bank Regional & Agribusiness Banking executive general manager, Brendan White, said although ongoing uncertainty on world financial markets has implications for the entire global economy, the agribusiness sector as a whole has a number of positive factors in its favour and an optimistic long-term outlook.
"The performance of the Agri Index this month once again highlights the resilience of the sector in these challenging economic conditions," he said.
After the departure of Great Southern Limited and Timbercorp Limited from the Agri Index, it continued to deliver a positive result due to the strong performance of AWB Limited, ABB Grain Limited and Incitec Pivot Limited.
"In addition, the outlook for many Australian farmers remains positive as a number of favourable opportunities continue to emerge for agribusiness," Mr White said.
ABARE has forecast that average farm cash incomes for beef properties in northern and southern Australia are projected to increase by nearly 50 per cent and 60 per cent respectively in 2008-09, while the 2009/2010 Australian wheat crop is forecast at 22mt, up slightly from last year and above the prior seven year average of 19.5mt.
"This increase in wheat production is expected to be associated with an increase in exports," Mr White said.
"Improved yields in Southern New South Wales, Victoria and South Australia is also seen supporting production.
"These factors, together with this month’s Agri Index, point to a more promising outlook for Australian farmers and investors in the agribusiness sector."
Mr White also commented that seasonal conditions for farmers across the country, while varied, remain generally favourable.
The CBA says that on a risk adjusted basis, the listed Agribusiness sector is broadly in line with expectations for Consumer Staples and Financials sectors.
But forecast volatility remains high for the sector, at 29 per cent for the next 12 months, signalling to investors to remain cautious in the near term.
"The June Agri Indicators Report confirms that while the market will remain volatile the listed agribusiness sector is weathering the challenges of the Global Financial Crisis," Mr White said.
"Although this may present strong buying opportunities, investors entering the market in the coming weeks should do so cautiously."
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