Agriculture has come of age on the Australian Securities Exchange, joining investment sectors such as mining, banking and tech stocks with its own ASX agribusiness index.
The new broad-based S&P/ASX Agribusiness Index features a pallet of familiar farm sector names with market capitalisation totalling about $30 billion.
The index, led by wine and beverage industry giant, Treasury Wine Estates, tracks trading activity of listed businesses primarily involved in the production of agricultural goods and services, or commodities used as inputs into primary production products.
The ASX conceded the index somewhat belatedly filled a gap in the stock market family of indices represented on its boards.
Head of Strategic Delivery, Capital Markets at ASX, Ken Chapman, said the AgBiz Index set a new benchmark for monitoring the performance of primary production companies and the primary industry sector as a whole.
"The profile of agribusiness has been hampered by the absence of an index benchmark akin to mining, energy, banking, property, healthcare or technology," he said.
Accelerating climate risks, booming consumer demand, increasing complexity in geopolitical relations and supply chains, and exponential advances in technology were driving demand for capital in all stages in the agricultural value chain.
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The index launched on Tuesday with 25 constituents, with the top 10 by market capitalisation being TWE, A2 Milk, Nufarm, GrainCorp, Elders, Costa Group, Bega Cheese, United Malt, Rural Funds Management and Inghams.
For its first month it will be adjusted at the end of trading each day, but from July 1 will update automatically with real time movements in the stock market.
"By raising the profile of the sector, the AgBiz Index will increase investor understanding and interest, and be a critical ingredient in priming the market for the next phase of agricultural innovation," Mr Chapman said.
For many investors, recent market volatility had highlighted the benefits of a diversified investment portfolio and of quality counter-cyclical stocks, such as those in the agribusiness sector.
Towards $100b goal
Given the ASX facilitated access to the fifth largest pool of pension funds globally and had a long history as an efficient capital raising venue, he said the AgBiz Index would be significant in supporting agribusinesses to grow and meet the industry's goal of becoming a $100 billion industry (farmgate value) by 2030.
Head of ESG and Innovation with S&P Dow Jones Indices, Reid Steadman, said the joint initiative aligned with the Australian Government's goal to expand the agribusiness industry.
"This innovative index reflects the market's heightened awareness of the need for sustainable agriculture," he said.
"It will also serve as a valuable tool for investors seeking to gain exposure to this vital driver of Australia's economy."
The index is made up of companies from the largest 1000 ASX-listed securities and will look beyond the Global Industry Classification Standard (GICS) agricultural products sub-industry to include11 sub-industries such as brewers, packaged foods and meats, paper products, fertilisers and agricultural chemicals, distillers and vintners.
The index then uses a list of keywords such as beverage, dairy and farm to identify eligible companies.
It does not have a set number of constituents, which means listings on the AgBiz Index and their respective weights can change at each semi-annual rebalance.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
