Sunrice released their financial update.

Seems like a good update. Despite challenges, debt got reduced.

My reasons were selling was not the business itself, but the shareholder structure in which farmers had to maintain a holding was hard to understand. I thought having farmers as shareholders meant there could be lots of inside information not privy to the general investor. An example would be a bad growing season due to poor weather which possibly could make a farmer sell some shares. That's just my thoughts so I could be wrong.

There is also the vesting arrangements that will come into effect in a few of years where Ricegrowers will lose the right to export rice in the Northern rivers although I think the impact will be small given the business has now diversified into other areas and revenue from other businesses has grown.

Finally I don't usually buy the Sunrice brand but usually what is cheaper in the shop..

I suppose if you can get past the shareholder structure, the cyclical nature of growing rice amid climate change and want a large dividend then maybe can't go wrong here.

As usual I sold too soon after getting a bit impatient by the price stagnating. Oh well, at least I did not sell at the lows last year (6.25).

Full link if anyone is interested.

Sunrice could potentially lose export rights for rice grown in the Northern rivers to independent growers as part of the review on vesting arrangements by the NSW government.

News sounds bearish but the share price still keeps getting bid and holding at the end of the day. Seems like someone thinks this piece of legislation will unlikely happen.

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Presentation to the Australian Rice Growers’ Conference - link

At around 435m market cap, this food business is not small and upside is limited versus a small cap. But for a business this size with so much scale this is still ignored by the market.

Share structure which was mentioned in the last straw. A major headwind for the share price as holdings of rice growers and maximum holding limits makes it hard for institutions/funds to build a large position. Investors would however benefit from the high dividend instead (now paid twice a year from once a year)

Already aware of the supply crisis around the world ex-Australia

Ricegrowers global supply/demand network - economies of scale???

Supplying to the heavily drought-affected United States

Potential new markets - UK post brexit.

Supply is no issue for now. With China restricting exports of Japonica rice to the world, could ricegrowers capitalise on this lucrative export market?

Brand awareness with Poh:

Issues: Water and sustainability

Issues: Still a price-taker but with drought happening in other markets at a time when rice consumption continues to grow maybe an inflection point will be reached soon...

Finally there is the question of what happens when the above average east coast rainfall disappears and we are in drought? The 50% reduction in water usage might not mean a thing unless there is a secure supply of water even during drought times.

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Rice production around the world affected by drought /low rainfall

South East Asia

USA

Europe

Fortunately there has been above average rainfall around Australia which would be a positive for rice production here and sales for Ricegrowers.

I think this view is still under the radar.

My only negative is the confusing share structure of Ricegrowers in which rice farmers must hold at least 3000 shares and are free to exit their position when they leave the industry which doesn't help the price.

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