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ASX launches agribusiness index, as more investors seek to include ag in their portfolio

Jon Condon, 31/05/2022

THE increasing desire among investors to include agriculture-related stocks in their portfolio is one of the key reasons why the Australian Securities Exchange has launched an agribusiness index this week.

The ASX, in partnership with S&P Dow Jones Indices, launched a broad-based Agribusiness Index including 25 larger listed companies whose principal business activity is in the primary production of agricultural products or in the production of commodities used as inputs into primary production.

The index tracks the performance of agribusiness companies listed on the ASX, providing a quick way for investors to see the health of the sector, guiding financial firms in the creation of index funds and exchange-traded funds, and helping investors gauge the performance of their investments.

At launch, the 25 represented companies had a combined market capitalisation of close to $30 billion. It includes household names such as Elders, Australian Agricultural Co, Nufarm, Rural Funds Group, Graincorp and Ridley. Others include Treasury Wine Estates, A2 Milk and Bega Cheese.

The index selects companies from the largest 1000 ASX-listed securities and will look beyond the Global Industry Classification Standard agricultural products sub-industry to include a total of 11 sub-industries such as brewers, packaged foods and meats, paper products, fertilisers and agricultural chemicals, distillers and vintners. The AgBiz Index follows the S&P/ASX Australian Indices Methodology.

The ASX said the index filled a gap in the suite of indices representing the diverse sectors on the ASX.

“Agribusiness has always been an iconic part of ASX’s history and identity,” the exchange said in a launch statement. “From the origins of our derivative market as the Sydney Greasy Wool Futures Exchange through to today’s globally dynamic capital markets, ASX’s involvement in the agribusiness sector is deep and long-standing.”

“Through the Index, ASX is bringing greater awareness to this vital sector. It will support agribusinesses to grow and prosper by enabling them to tap into one of the deepest pools of investment capital worldwide. It will also provide new and exciting opportunities for investors to gain exposure to this sector.”

ASX Head of Strategic Delivery for Capital Markets Ken Chapman said the AgBiz Index sets a new benchmark for monitoring the performance of primary production companies and the primary industry sector as a whole.

“The profile of the agribusiness sector is hampered by the absence of an index benchmark akin to mining, energy, banking, property, healthcare or technology,” Mr Chapman said.

“The combination of accelerating climate risks, booming consumer demand, increasing complexity in geopolitical relations and supply chains, and exponential advances in technology is driving demand for capital in all stages in the value chain.

“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.”

S&P Dow Jones Indices’ Reid Steadman, head of ESG and Innovation, said the index aligned with the goal of the Australian Government to expand the agribusiness industry.

“This innovative index reflects the market’s heightened awareness of the need for sustainable agriculture. It will also serve as a valuable tool for investors seeking to gain exposure to this vital driver of Australia’s economy.”

Mr Chapman said the ASX facilitated access to the fifth largest pool of pension funds globally, and had a long history as an efficient capital raising venue.

By creating the AgBiz Index, ASX is supporting agribusinesses to grow and meet the Delivering Ag2030 goal of becoming a $100 billion industry by 2030.

“For many investors, the recent market volatility has highlighted the benefits of a diversified investment portfolio and of quality counter-cyclical stocks, such as those in the agribusiness sector,” he said.

Eligibility for the index includes minimum float-adjusted market cap, daily traded value and liquidity thresholds. The index does not have a set number of constituents; its constituents and their respective weights can change at each semi-annual rebalance.

The Index will commence quotation as a real-time index on 1 July 2022.

The graph below plots the ranking of the top 20 ASX agribusinesses, based on market cap, since 2015

 

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Comments

  1. Natalie Williams, 01/06/2022

    Interesting and long overdue metrics! I hope they include non-financial reporting also…..such as ESG, carbon sequestration/emissions reduction strategies, agtech innovation and natural capital values. Australian Ag companies are leading in many of these fields and I am sure most of those listed will be recording and adopting such analytics already.

  2. David Connellan, 01/06/2022

    How come JBS is not included among the companies?

    While its a publicly-listed company, JBS is listed only on the Brazilian Stock Exchange, not Australia’s. There is talk it may seek listing also on the New York Exchange. Editor

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