Hi All, have always liked the FRM business and no nonsense reporting, did own a small parcel after the fall from grace in 2018, but have since sat on the sidelines. One thing that is clear, and prominent in a lot of farming businesses, is that the grain price rise (due to poor production in Aus), has really hurt FRM and its ability to generate a profit. Couple that with egg pricing pressure and there have been a lot of suppliers loose out and continue to run in a dire financial position... That however is slowly changing.
The latest forecast from the Australian wheat board has both wheat and feedstock grain prices reducing significantly on the back on solid Australian production, due to easing of drought conditions and the continuing good winter rains the east coast of Australia has seen... Indicatively NSW contract grain pricing for the 2020/2021 FY are coming in circa 10-20% cheaper, and the commentary from the Department of Agriculture suggests that this easing of grain prices is set to continue.
This bodes well for FRM, and the general industry (ING and the like). To put things in perspective, below is the FY FRM revenue statements and a corresponding grain price. For perspective 'raw material and consumables' of which grain is part of, accounts for roughly 80% of the cost of doing business for FRM. There is very clear correlation between FCF and prevailing grain prices. All bodes well for a return to profits, unfortunately though FRM have $12M worth of debt which needs to be repaid, but the next 3yrs could provide a strong tail wind for FRM.
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