Yep thinking out loud here too. The important point to note is...

Yep thinking out loud here too. The important point to note is that history may now not be relevant to earning potential if we have commodity values likely to forge new highs across the board in agriculture. And its important to note here that my strength (if I have one) is fundamental analysis rather than the actual financial analysis I suspect you are very good at.

The other important thing to note especially with the listed cotton companies which have a land and water resource, they have other production options. So the economics of cotton production may well be irrelevant more of a historical fact.

I mean this comment from OLAM in its recent takeover offer for QCH:
"OLAM says that the acquisition would also give it a platform in Australia to move into other commodities like grain, WHEAT, EDIBLE NUTS, SUGAR, as well as DAIRY products which is a segment OLAM is especially trying to grow.""

That they have not been profitable and possibly have a drought discount priced into their market cap potentially increases the value on offer, particularly if another comany can see a diversification option offering more attractive and/or safer profits.

So you have a land resource, a water resource and capex to consider also I guess. Is there value there particularly if you are seeking diversification in a potential slowing global economy.

The one thing to consider with any of the producers is their hedge book. What is in place in terms of commodity and forex hedging? That is a risk and also a determinant of how you must use the land. Ie if cotton hedges are in place they may well be committed to growing cotton unless hedges are wound up. Would there be any liabilities there?

Your comment:
"Therefore as far as NAM go, the investment case must be that cotton prices will shift 'permanently' higher going forward. Is that the case ? Can the world get by without cotton?"
I think yes the trend for cotton is only one way but it is also a commodity linked to the health of the global economy. So less essential than grain commodities.

"I do not discount the consolidation and T/O upside (or the diversification into grains argument) but what I am looking for is not a 50% price appreciation in 12 months, rather a 1,000% appreciation in 10 years. Have we got that here?"
Yes hearing you but it maybe impossible to maintain a pureplay in agriculture anyway if the M and A phase is as vigourous as I feel it might be. Remember Australia has a massive land resource relative to our populous neighbours and as illustrated with the QCH move, AUstralia is on the radar. Don't know how to position for a 1000% appreciation in 10 years unless you get the likes of Wesfarmers to get off its backside and re-enter the sector with some major acquisitions. WES has CSBP but they need to look to get further downstream towards production like IPL. They should be looking at some of these junior P and K plays that are out there perhaps.

AAC has a good portfolio of properties and is a pureplay on beef. Low input beef production at that too since it is mostly value adding a rainfed feedstock - grass. Some grain finishing so there'd have to be risk priced in there depending on what price risk management strategies they have in place.

I don't like grains marketers because of the uncertainty over the Single Desk and the government has done nothing but insert further uncertainty there by given the agrarian socialist pr#ck McGauran the right to exercise veto over export permits of wheat. Big business should be pushing for full and complete deregulation and then you would see a massive scramble to invest in grain related infrastructure about the countryside but probably mostly here in WA being the largest grain producing State. At the end of the day though, grains marketers are just a middleman but if they are god at acquiring cheap and selling expensively they'll make good coin but it is an inexact science given the commodity market volatility.

Clear as mud? LOL

Bottom line though, I think the market will love low input producers of anything agricultural.