When tins of organic baby formula are the hottest items going, it's another sign of how Australia is moving from a mining to a dining boom.
Bellamy's Organic hit the news this week when desperate parents were unable to find the Tasmanian formula brand at the shops.
Bellamy's chief executive Laura McBain blamed the shortage on mass online demand in the lead up to China's "Singles Day" shopping event on Wednesday, saying "it's taken us by surprise".
However, the product has reportedly been scarce in Australia for months, with supermarkets rationing to counter Chinese tourists stocking up on so-called "white gold".
Even before the rush on infant formula, the share price of Bellamy's had jumped tenfold in a year. The company listed last year and McBain has focused on expanding exports to Asia, including opening an online store in China in April.
McBain, who was chief executive for the seven years before the initial public offering, has made millions from the success of Bellamy's. She made $5.33 million selling down shares and cashing in share options in September, when the share price was $6.70.
The share price is now more than $10 and McBain still owns 400,000 shares plus another 1.17 million in her superannuation fund, as well as retaining more than 800,000 options.
Everything from cattle to poppies
But Bellamy's isn't the only listed food stock delivering mouth-watering returns.
A honey exporter, Capilano, is up 260 per cent, and guess what? Its biggest customer is also China.
Unlike mining though, the food boom isn't just about China. Thanks to changing tastes and new free trade agreements, South Korea and Japan are already bigger markets for some of our food exports. while the rest of Asia is catching up.
Also, the much hyped Trans-Pacific Partnership free trade deal will slash tariffs on beef (from 19.5 per cent to 9 per cent in Japan), rice and dairy exports while the US sugar import quota will be doubled and for Australian cheese increased by 56 per cent.
Only a few years back there were just a handful – well, with both hands if you also count fertilisers, which you should – of listed food stocks. And their scarcity was more the result of foreign takeovers than failure. Today you might say agribusinesses are a fast-growing crop. There are at least 40, this time counting phosphate explorers as well, with more mooted.
All I can say is if we're supposed to become the food bowl of Asia, somebody better warn the Australian Securities Exchange. It has an index for property trusts, all dozen of them, but not for agribusinesses.
The choice can best be described as a smorgasbord, with anything from cattle to fish and even poppies (yes, TPI Enterprises uses them as a narcotic, but purely for pharmaceutical drugs, you understand).
Yet it's not as if the prices of soft commodities – what economists call food, yes I know – have been soaring either. Like other commodities they've been falling, with the exception of beef and lamb.
But the thing to know about agribusiness, after what a bitch the weather can be, is that it's a long-term affair.
One of the world's shrewdest commodity traders, billionaire Jim Rogers – he and George Soros founded the famous Quantum shares fund which left the rest of Wall Street for dead – argues food will become more scarce not just because of the world's growing population, but the fact that farmers are getting on and their children don't want to work on the farm.
He doesn't put an exact date on this, mind you, but the trends for rising food prices appear compelling.
Even as the world's population is projected to rise another 3 billion by 2050, which economists say will require a 45 per cent lift in food production, arable land is shrinking. From 0.45 hectares per person in 1960 it dropped to 0.25 hectares in 2010 and is forecast by the United Nations to drop to 0.20 hectares in 2050.
Urbanisation isn't the only culprit, either. Land is also being diverted from food to fuel with the production of ethanol.
Nor is coal seam gas mining helping, as it takes up arable land and the polluted water affects paddocks downstream.
At the same time, the growing middle classes in Asia are turning to more protein-enriched diets. On current trends this demographic will grow fivefold over the next 15 years.
True, that's been said for years. Oh dear, I may have been among them.
And bear in mind that better farming methods, fertilisers and insecticides will boost production.
Still, the smart money is going all rustic. Apart from Rogers, our own Gina Rinehart, Andrew Forrest and Chris Corrigan have invested in agribusinesses. Cattle stations are being gobbled up by foreign interests.
The catalysts this time are the weak dollar, low interest rates and free trade agreements popping up everywhere. Not even official forecasts of extending drought next year are putting investors off.
Nor is slowing growth in China a concern, since its citizens still have to eat. Given valid concerns over the safety of Chinese baby formula, Bellamy's could be feeding a good number of China's 20 million babies. And the end of China's one-child policy will likely mean more babies to feed.
So how can ordinary investors get their bite, so to speak?
The biggest listed stock is the wheat and barley handler GrainCorp, which is trading at around 30 per cent less than its peak just over two years ago, the result of drought and rejection of a takeover offer from the US by then treasurer Joe Hockey. Remember him?
It's also one of the most seasonal and so cyclical – read volatile – of agribusiness stocks, which is saying something.
"I'd say wait a while and see how bad the harvest is and maybe buy on a price dip. But our concern is it faces strong long-term competition," says Paul Jensz, co-founder of Pac Partners and a leading expert on agribusiness stocks.
Hmm, then how about AACo, as the Australian Agricultural Company now calls itself? It's our oldest listed company and the world's biggest listed beef producer. Its cattle stations account for 1 per cent of Australia, not that this has meant much. As an investment it's been something of a dud for years.
But beef prices are booming due to demand from the US and Japan.
The benchmark young cattle price indicator is hovering near a record, having jumped 55 per cent in a year, which probably explains your last meat bill. The trouble is AACo is paying rather than receiving these prices because it's restocking its herd.
But since this has depressed its share price, fund manager and tip sheet Fat Prophets sees a buying opportunity, predicting it's "setting itself up for a good few years of growth and ultimately a more sustainable level of earnings".
Although dairy prices have gone in the opposite direction to those for beef, there's hope here. The GDT milk powder price halved earlier this year due to rising supply and falling demand from Russia, but there has been some recovery since. And China, always interested in the long game, is keen, with one highly connected company snapping up more than 5 per cent of the recently floated MG Trust, Australia's biggest dairy co-operative.
The stock's projected dividend suggests a yield approaching 7 per cent plus the franking credit, but naturally it's linked to the milk price, so could prove volatile.
But Bega Cheese is one of four stocks that Jensz sees as safe investments, which are "strong in their area with a good return on investment".
The others are Select Harvests, Ridley and Tassal.
"They're getting less volatile and more resilient. They can grow through the cycle and bulk up when it looks tough," Jansz says.
Select Harvests, an almond producer and considered a takeover target, was the first investment in agriculture by one of the biggest super funds, First State Super, though through a land sale and lease-back deal rather than by buying the shares.
Almonds are "Australia's highest-grossing horticultural export", says chief executive Michael Dwyer, and adds this won't be the fund's last investment in agriculture either.
In the three years since an unfortunate almond recall and salmonella scare, its share price has soared almost 800 per cent.
More seasonal stocks such as MG or Ruralco are "all too hard for most investors because they'd be chopping and changing on a weekly basis", Jansz says.
But two other agribusinesses worth considering are Nufarm and Elders.
Nufarm, which provides crop protection and specialist seeds but is best known for Round-Up weed killer, is trading near a five-year high. Fat Prophets has just moved back into it because the stock has a new chief executive who – a familiar story – is cutting costs. Also it's not as subject to the vagaries of the weather and El Nino as you'd normally expect thanks to its global market.
"Nufarm is a geographically diverse business. While the dry conditions that El Nino could bring to Asia could be bad for crop yields, the reverse could potentially be true for yields in parts of the northern hemisphere on the back of wetter conditions," Fat Prophets told subscribers.
Websters is the biggest walnut, cotton and onion producer, and who knows what value might be lurking in the huge irrigation water rights it owns.
Recently listed Beston Global Food is building a portfolio of paddock-to-plate interests by targeting family and privately owned dairy, seafood, meat and health food companies.
If the sharemarket is a bit much for you, and agribusinesses are among the most volatile stocks of all, there are other ways to get a seat at the table.
An unlisted fund, StockBank, leases sheep and cattle to farmers who fatten them up for sale. You can choose between cattle (with 180 to 280-day leases) or sheep (70 to 100 days). The beauty is it doesn't own any land, has no overheads and the livestock breeding and fattening cycle is mercifully short.
Best of all it has nothing to do with the sharemarket or much else really. It posted a 7.1 per cent annual return in August.
But why stop there? You can buy units in the entire food chain with Ironbark's Global Equity Agribusiness Fund. It lost 18.6 per cent in the year to September so the units are going cheap.
Or there's a listed real estate investment trust, Rural Funds Group, run by Australian Unity, which leases land and livestock to farmers. It's returned 30 per cent over the past year and doubles up as a play on the weak dollar and low interest rates.
When investing in agribusinesses:
- Be choosy: there are over 40 stocks as well as some listed and unlisted managed funds
- Most stocks are seasonal and weather-driven and so should be seen as a long-term investment
- Agriculture is also a play on the weak dollar and low interest rates
- Be prepared for wide share price volatility
- Stocks that also process food products are safer than pure growers