THE agribusiness sector outperformed the broader stock market in 2007-08, but the best is yet to come when the drought ends, says researchers.
The Australian Agribusiness Group Agri-index, measuring the performance of 59 agribusiness stocks, recorded strong growth for the third consecutive year.
It was led by Incitec Pivot which enjoyed a 132 per cent rise in its share price during 2007-08, doubling its market capitalisation to more than $9 billion.
The group's research director, Tim Lee, said the Agri-index increased by 79.5 per cent compared with the All Ordinaries' fall of 15.5 per cent over the past year.
Mr Lee said it highlighted the strong demand for agri-listed equities.
"For the agri sector to grow in such volatile market conditions and again outperform the All Ordinaries is a fantastic result," Mr Lee said.
The Agri-index has measured listed agri stocks since 2000 in three categories: manufacturers, producers and diversified companies.
Mr Lee said manufacturers reported the strongest increase over the past year of 92 per cent, whereas the producer index fell by 11.9 per cent and the diversified index dropped by 16.3 per cent.
"Clearly, manufacturers of agri products have driven the success in the sector this year," he said.
Apart from Incitec, the success stories over the past year were Clover Corp (up 52 per cent), Australian Wine Holdings (33 per cent), TFS Corp (31 per cent) and Olea Australis (30 per cent).
"The market is certainly watching agriculture closely, which is not surprising considering the attention towards the soft commodity boom," Mr Lee said.
He said some managed investment scheme companies did well, while others such as Great Southern and Timbercorp had not fared so well due to uncertainty surrounding tax rulings on non-timber MIS projects.
"But they are looking at other means of capital raising so they won't be standing still, and I look at them as having long-term growth prospects," Mr Lee said.
He believes that when the drought finally ends, it will signal a rise in fortunes for more agribusiness companies. He said it would benefit the likes of Prime Ag, Australian Agricultural Co, Australian Wine Holdings, Buderim Ginger, Franklin River Olives, Farm Pride Foods, Namoi Cotton, Select Harvests and the grain marketers.
"We believe the outlook for the sector is bright due to the world supply demand situation and the soft commodities boom," Mr Lee said.
