DAIRY farm prices are plummeting, supermarkets are selling milk for $1 a litre, and many ageing farmers are scratching their heads about who will take over their properties when they retire.
And yet dairy is one of the world’s most dynamic industries, which is why Adrian Rowley thinks the time is right to float Australia’s first dairy farm.
The investment adviser has assembled a team of directors to form Australian Dairy Farms (ADF) that he hopes will start trading on the ASX next month. The company has engaged Bell Potter to raise up to $14.5 million. It already owns two farms in south-west Victoria and hopes to buy another 14 more to produce 50 million litres of milk a year by 2016.
Mr Rowley and ADF’s three other directors hope to capitalise on Asia’s appetite for dairy, particularly infant formula, which the Australian government’s commodities forecaster ABARES isn’t expecting to slow down soon. Such is the demand that it has pushed global prices to historically high levels and ignited a three-way bidding war for Australia’s oldest listed milk processor Warrnambool Cheese & Butter, which Canada’s Saputo won earlier this year.
The milk frenzy comes after a dismal decade for dairy farming. Australian milk production has plunged 20 per cent to about 9 billion litres a year, while farm prices have fallen, leading in some cases to bank foreclosure.But Mr Rowley said these factors strengthened the case to create a listed dairy farm: “From 2007 to 2011 China tripled dairy imports and dairy demand is 10 billion litres a year, which is more than the whole of Australian production.”
He said ADF planned to give investors two types of returns – earnings from dairy operations and exposure to rising farm prices off a cyclical low.
The company plans to operate large-scale farms with a minimum of 500 cows (the Victorian average is 300 per farm). It also plans to have properties in areas that traditionally have reliable rainfall, such as south-west Victoria.
Mr Rowley said the company’s plan was to become Australia’s biggest milk producer and be able to be a “price maker” rather that “taker” during contract negotiations with processors.
Source: Financial Review complements of Australian Country Life