A Well Seeded Opportunity

Having grown up on a farm I have to admit the agri focused stocks are of particular interest. A drive through Gippsland, Loddon-Mallee, The Murray-Riverina or Central Tablelands will show you vibrant paddocks and excellent cropping conditions. This is fertile ground and prime conditions. 

A key beneficiary of the conditions in these regions is the simplified Graincorp. To highlight the opportunity has been the recent strong announcement from Elders. GNC should be able to capitalise on the tailwinds of rainfall, operational efficiency and oncoming tech. 

Tech in the grain industry has been steadily growing and improving. The AgTech space is huge and grain has been of particular focus for a number of competitors. Blockchain for farmers to manage contracts, grain shipments, and the ability to hedge/participate on futures and commodities markets directly. This tech is both a threat and opportunity for GrainCorp but currently should be viewed favourably as they have previously been key participants of blockchain and have also got their online CropConnect product. 

The headwinds are potential trade conflict with China and the stock becoming subject to political horse trading. Domestic demand for grain and feed will soften but shouldn't be a major factor,  and increased supply may bring prices down but also shouldn't be significant. 

• Good balance sheet
• Good margins
• Great rainfall
• Challenging politics
• Rainfall already cooked into the share price

The June 10 ABARES crop report should be a positive catalyst for GNC and there is good upside to the stock. That being said, the upside is limited which is reflected in my valuation.