The TPP round-up: 5 industries ripe for investment


Blue Lake Invest is passionate about few things. Among them is dragon punch (the arcade game), recycled paper and dairy. But it’s dairy that gets most of the air time here. Part of a broader agricultural boom the industry is enjoying strong growth driven by growing demand both here in Australia and abroad in Asia. Lighting up the stock market even more is touted takeover bids and healthy interest from overseas investors.

The other key to this growth is trade liberalisation. We ran a series of posts here about the TPP (Trans Pacific Partnership) which has removed barriers to trade with some key partners. Since then more details have slowly been released highlighting the opportunity. This included a report from NAB (ASX:NAB) focused on agriculture. I have highlighted my key take outs below.

Protein (this includes beef, lamb etc.)

  • Beef remains Australia’s biggest agriculture export (yep, more than the white gold that is dairy)
  • 11 of 12 TPP countries will immediately cease imposing tariffs on lamb once the TPP commences

Blue Lake Invest has spoken about BFC, a diversified agricultural player who stands to benefit from growing demand of Australian produced protein. Otherwise you might want to check out AAC (Australian Agricultural Company) which is a big player in this space.

Grains, cereals and sugar (our Paleo readers may want to skip this one)  

  • This market is valued at over $8bn, however less than half goes to our TPP friends
  • Japan is the key market here, tarrifs on barley will be reduced by 45% within 10 years, while rice quotas will be improved for Australian exporters
  • The sugar trade has been sweetened with across the board tariff reductions and larger quotas. About one third of our sugar goes to TPP countries

Despite my personal opinions related to grain I have spoken about a grain giant in GrainCorp here, otherwise you might want to check out ASX:CSR who dominate the sugar market.

Dairy (Get excited, this is the big one)

  • Dairy exports sit at about $2.5bn and growing. 40% goes straight to TPP countries
  • Once again Japan will be the key market for our dairy exports with lower tariffs and improved quota conditions
  • Canada is a competitor in this space and will receive similar access, however remain geographically disadvantaged

There is no shortage on posts about dairy here at Blue Lake Invest, I have highlighted a few tags you might want to search to hear about all the fun happening here.

  • ASX:A2M: Everything about A2M including introduction to milk proteins all the way to market analysis.
  • ASX:BAL: Our hero stock here at Blue Lake Invest. Has a lot or articles and the price continues to grow exponentially.
  • ASX:BGA: A more mature stock but supplies BAL and BKL, as well as puts some of your favourite cheeses into the fridge at home.
  • Lastly, we have ‘Join the MOOvement’ (general dairy discussion) and Blue Lake Invests primary dairy tag ‘White Gold Rush’.

Wine and horticulture (for those wondering I am a Shiraz man)

  • The NAB report mentions oranges but I am more a wine person myself
  • It seems the world likes our dairy more than our wine, as the market is about $1.9bn, of which nearly half goes to the 12 TPP countries (no wonder we are friends)
  • South East Asia will be the boom market here, and our competitors include the US so I like our chances

The industry is obviously fragmented with a lot of smaller boutique wineries and relatively small export agents. But TWE (Treasury Wine Estates) have a pretty big operation and will be looking to take advantage of the above concessions.

Seafood

  • We are a net importer for seafood, so local consumers will probably benefit the most – some Australian companies with offshore operations might get improved access to our local market
  • Tariff reduction will occur up front with some TPP countries, while others including Japan will take up to 15 years

Not too many operators in this space listed on the ASX, but you might like to check out Tassal Group (ASX:TGR) which have enjoyed 34% growth over the past 6 months.

And that is a wrap on our TPP round up. As shown above the market is ripe for agricultural investment. We have a natural abundance of land and resources which will supply food to our foreign counterparts. As demand increases from population growth and strengthened purchasing power within the local Asian region Australian exporters will see a new resource boom.

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