The dry conditions in many of the key farming regions highlight the importance of water security for our listed agricultural plays. When it comes to water rights, some are in a better position than others.
Everyone likes almonds, but surprisingly few countries produce them in commercial volumes. This skewing of production is either a positive for local producers or maybe the opposite if they have to compete with the most producers with the greatest market clout which work together under the aegis of Blue Diamond, the century old Californian almond co-op and marketing exchange.
FY18 results materially missed forecasts because of a lower almond price. A record US almond crop and the trade tensions have caused the price to fall recently. Select Harvest's FY19 crop estimates are up 7.8% on FY18.
Morgans believes the company should achieve at least the top end of its pool price estimate of $8.10-8.50/kg, reflecting positive industry fundamentals and a falling Australian dollar. Morgans upgrades forecasts, given the company’s strong operating leverage to rising almond prices.
The company has issued materially lower guidance for FY17 net profit because of a lower Australian dollar almond price and cost pressures. Morgans consequently downgrades FY17 net profit forecasts by -40.3% and makes material revisions to FY18 and FY19 as well.