AUSTRALIAN Agricultural Co (AACo) today posted a 40 per cent fall in annual profit, but said it expects modest price rises in beef this year as drought conditions begin to ease. Australia's biggest beef producer said severe drought in the second half of 2006 impacted its markets resulting in a 2006 calendar year net profit of $10.1 million, down from $16.78 million in the prior year.
The result included a $17.3 million write down of its trading cattle inventory as required under new accounting standards.
AACo said beef consumption was rising in Australia and the United States, a key market, while protocols restricting the access of US beef into Japan and Korea would continue to provide opportunities.
Chief executive Don Mackay said world demand for clean exportable beef remained strong and was growing on a per capita basis.
"We see cattle prices likely to rise modestly as the effects of the drought start to dissipate,'' Mr Mackay said today.
AACo's shares (aac.ASX:Quote,News) were 13 cents or 6.2 per cent higher to $2.23 at 2.24pm (AEDT).
Mr Mackay said northern Australia, which is home to the majority of the company's 560,000-strong herd, has enjoyed a great start to the year with strong rainfall.
"The world has become so engrossed with this thing called climate change that everything that is happening is ascribed to it, and therefore it is all coming to a dreadful sticky end and it's happening now,'' Mr Mackay.
"We all need to be a little more measured than that - northern Australia is enjoying a very good start to the year and the general consensus is that El Nino is breaking down.
"That is why we are having drought - because of El Nino.''
He said AAco's forward purchase of grain will dilute the impact in grain prices felt in the spot market during 2006.
He reiterated AAco's long term strategy includes plans to double the size of the herd by 2015, acquire additional grazing lands and improve land-carrying capacities by up to 20 per cent on selected properties.
Another agribusiness group, Ruralco Holdings, told shareholders at its annual general meeting yesterday that it expected to sell off cattle and sheep if the drought continued.
But Ruralco chairman Andrew Kemp said there had been signs recently of price improvements driven by international demand and the promise of Autumn rains.
He said wool prices are starting to firm as buyers see a looming shortage in 2007.
"This has resulted in extra bales being sold towards the end of 2006 and into 2007 with earlier shearing and wool coming out of storage to meet demand,'' Mr Kemp said.
