Investing in Agriculture

PrimeAg engaged ACIL Tasman to prepare an independent expert report on the global soft commodity outlook.

The outlook is summarised as follows:

• Global commodity markets are surging due to strong economic growth in developing countries.
• Coinciding with this strong economic growth is the rise of plant based (renewable) energy sources primarily for transport in developed countries.
• The demand driven nature of the current market rise is a structural shift from previous supply driven market surges, although adverse weather conditions in several countries has
• exacerbated the supply position recently.
• Underpinning this short to medium term rise in demand is continuing global population growth.
• Land available for agricultural production overseas is facing some constraints as environmental concerns, resource degradation, water availability and urban encroachment are likely to reduce the probability of increases in land use for agriculture and may even lead to reduced land supply.
• As a result of increased demand exacerbated by short term supply constraints (weather induced), stocks (and stocks to use ratios) of most agricultural commodities have fallen significantly in the past 5 years. This will mean that markets will be highly sensitive to climatic (short and long term) and other supply variables.
• It appears that prices for most agricultural commodities will remain historically high (although below 2007 levels) and volatile for some time.

The summarised version of the independent expert report on soft commodities can be found in Section 4.1 of the Prospectus.