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This breed can thrive in the toughest conditions – Could they help your portfolio do the same?

March 3, 2020
Blake Reid

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This breed can thrive in the toughest conditions – Could they help your portfolio do the same?

In times of instability and volatility, a little bit of steadiness is a welcome thing. While share markets are being eviscerated, it’s a good reminder that some things in life never go out of fashion.

In times of instability and volatility, a little bit of steadiness is a welcome thing. While share markets are being eviscerated, it’s a good reminder that some things in life never go out of fashion. Food is a necessity; it doesn’t have bad quarters, or huge declines in demand.

While markets are falling, the demand and furthermore, the need, for sustainable sources of protein is only growing.

For investors, the market numbers over the past week make for grim reading.

The ASX plummeted over 11% in just one week, and Wall Street had its worst week since the 2008 crisis. This is particularly noteworthy given the record highs reached in the weeks up to this point, sparking fear that we’re going into a bear market. 

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European and Asian markets haven’t escaped the damage either, and global markets are projecting a gloomy outlook following the coronavirus. Yet given all the red numbers that investors are seeing, there’s one asset that no one is suggesting will be lacking in demand: Food.

Take the price of lamb in Australian supermarkets. Very rarely does it deviate too far from the standard price of about AU$9-10/kg. Demand for food, and protein in particular, isn’t just constant, it’s constantly increasing. This means that the demand for livestock that is efficient at producing and reproducing is consequently growing too.

While Australian investors are increasingly speculating about a potential recession, and bracing themselves for the impact of the coronavirus, the global need for a secure food supply isn’t going anywhere.

In times of market fluctuations reacting to instability, Dorper lambs is one type of livestock particularly well suited to withstand these market developments. They continue doing what they do best – putting on 250g per day and reproducing. Dorpers is a sheep breed that grow faster than other sheep and reach reproductive maturity quicker, which means farmers can increase their stocks at a quicker rate.

Whilst cattle take approximately five years to double their herd size, Dorper lambs can achieve this in just one year.  They also perform very well in Australia’s arid conditions, having high fertility rates that produce twins in an extraordinary 70% of pregnancies. 

They are very efficient feeders that need less food to gain weight. This is important in drought-prone areas that face low grass levels. Even during times of drought, these resilient sheep hit their target weights. Dorpers also shed their own fleece so they don’t need frequent shearing during summer. This makes them more resistant to heat.

While the COVID-19 virus is feared to have an impact on Australian Farming, and both sheep numbers and other livestock numbers going down, producers and livestock associations are confident that the numbers will bounce back thanks to the steady February rainfall and international demand for Australian lamb.

There has already been a reaction to local produce in China due to the virus coming out of the food market, with Chinese manufacturing and distribution being impacted by containment.

Food safety and food security will likely dominate the headlines in these markets, and will only increase demand for the already preferred Australian and American brands. We may in fact see a phenomenon in the coming year where demand outstrips supply for some of these exported products and the pricing market might be forced to react.

Investors seeking to shelter themselves from the tumultuous start to 2020 could consider an investment opportunity which provides exposure to Dorper lambs through the Australian Food & Farming key advantage lamb fund. Click here to request the IM.

 

 

Reach Markets have been engaged by Australian Food & Farming to assist with private investor management and are the advisors assisting with the management of this offer. Reach Markets may receive fees depending on whether an offer is taken up by investors.


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