PGW - PGG Wrightson

[Mick100]

quote:Originally posted by Snoopy
[

At those profit levels the forward PER improves to around 7.6-9.3 at today' share prices. That is probably reasonable at the top of the business cycle, for a cyclical business. So I see no compelling reason why the PGW share price should go higher from here.

SNOOPY

discl: hold PGW

As usual, your getting bogged down in the details and missing the big picture again Snoopy. What do you think is going to happen to food prices when a big chunk of the world's arable land is being used to grow crops for bio fuel production? The main source of protien in asian diets comes from chicken. What do you think is going to happen to food prices if every last chicken is wiped out by bird flu? What do you think the growing middle class (now 200m in china) are going to spend more money on than they did previously? And remember that china's ag productivity levels are already quite high so there's not alot of scope for increased production domestically. Where are they going to get the food from which meets their newly aquired tastes?

World food prices are going to be heading north in my opinion and although NZ is no longer the cheapest producer of meat and dairy products it is still a more efficient producer than most other countries in the world. PGW has the lions share of farm retail business so they do stand to benifit from rising world food prices.
.

[winner69]

quote:Originally posted by Mick100

World food prices are going to be heading north in my opinion

Mick ... you know how to ruin a sunday morning coffee

rising world prices .... nzer's will pay about the same for the leftover stuff not good to export .... ****e mate ... even more and more people in NZ dependent on the government .... winner better make sure his shares make decent gains

agree with your hypotheseis though... so the way forward is to share the riches of a food producer so you can afford to eat the stuff?

[duncan macgregor]

Mick is quite right food prices will soar. With China taking over manufacturing you want to be very pleased that we have products to sell with soaring prices. I am starting to find it very difficult to hold anything long term, and might think about going full time trading. PGW is a classic example of a share that i trade in one account, and hold long term in another. I am forced for the sake of tax reasons watch the price go down in my long term portfolio and still hold. In my trading account i am miles in front. Other shares with the same companies with similar results are NZO, POT,
Long term PGW is a must own but short term plays as with POT, and NZO, it is much more profitable to trade even allowing for tax.
macdunk

[rmbbrave]

After FPA's recent fall Duncan's hammering away on the "China will steal all it's business theme" is starting to look prophetic.

[rmbbrave]

quote:Originally posted by winner69

quote:Originally posted by Mick100

World food prices are going to be heading north in my opinion

Mick ... you know how to ruin a sunday morning coffee

rising world prices .... nzer's will pay about the same for the leftover stuff not good to export .... ****e mate ... even more and more people in NZ dependent on the government .... winner better make sure his shares make decent gains

agree with your hypotheseis though... so the way forward is to share the riches of a food producer so you can afford to eat the stuff?

Food prices are always going North - it's called inflation.

Do you mean you expect food prices to rise faster than manufactured goods or services?

[Mick100]

quote:Originally posted by rmbbrave
[

Food prices are always going North - it's called inflation.

Do you mean you expect food prices to rise faster than manufactured goods or services?

In "real" terms food prices have been decling for the past 200 yrs.
In case you don't know what "real" means teachy - it's taking inflation out of the food prices.

This has come about because of the increase in productivity of farmers, eg - in 1820 (US) each man working on the land produced enough food to feed 4 people. Today each each man working on the land in the US produces enough food to feed 100 people.
Steadily rising productivity has led to lower prices or to put it another way - technology is a curse on the man who works with a hoe.

My argument is that this situation is about to change in a big way.
Increases in productivity are going to be harder to get from now on in the developed world. The big leaps forward in technology have already been taken with the use of modern macinery, irrigation, fertilizer, pesticides and insecticides. The only place left to increase productivity is through genetic modification of seeds.

Now to come back to my earlier points which are going to increase demand/reduce supply of high value food products;
- a growing middle class in asia
- a decline in the area of land available to grow food crops
- the possibility of bird flue becoming more widespread
.

[rmbbrave]

What percentage of the price you pay at the supermarket is the actual cost of growing the food and what percentage is the cost of processing, transport, marketing, packaging and mark-up for each stage of the chain?

With fresh vegetables the cost of the food itself is likely to be quite high but with something like a packet of potato chips the cost of the spuds themselves would be a small percentage of the product.

If the price of potatoes doubles the cost of a packet of chips might only go up a few cents.

[KJ]

quote:Originally posted by Mick100

quote:Originally posted by Snoopy
[

At those profit levels the forward PER improves to around 7.6-9.3 at today' share prices. That is probably reasonable at the top of the business cycle, for a cyclical business. So I see no compelling reason why the PGW share price should go higher from here.

SNOOPY

discl: hold PGW

As usual, your getting bogged down in the details and missing the big picture again Snoopy. What do you think is going to happen to food prices when a big chunk of the world's arable land is being used to grow crops for bio fuel production? The main source of protien in asian diets comes from chicken. What do you think is going to happen to food prices if every last chicken is wiped out by bird flu? What do you think the growing middle class (now 200m in china) are going to spend more money on than they did previously? And remember that china's ag productivity levels are already quite high so there's not alot of scope for increased production domestically. Where are they going to get the food from which meets their newly aquired tastes?

World food prices are going to be heading north in my opinion and although NZ is no longer the cheapest producer of meat and dairy products it is still a more efficient producer than most other countries in the world. PGW has the lions share of farm retail business so they do stand to benifit from rising world food prices.
.

Mick-& others-are you currently buying PGW now on the basis that rising world food prices are imminent? Or would it be better to assess the coy fundamentals looking out 1 to 2 yrs?

[Mick100]

Hi KJ

I'm a commodities bull
In 2002-03 I got into base metals, precious metals, oil, nat gas, and coal.
This yr I have diversified my portfolio somewhat by adding a few mining services companies and a couple of companies related to ag commodities- PGW and AAC (looking at a third ag company)

My strategy is to play the commodties bull market.
I don't know if I'v got my timing right with PGW.
There are not alot of ag related companies to pick from on the NZX/ASX but I do want to have some exposure to ag commodities over the next few yrs for reasons that I have already made clear.
.

[Snoopy]

quote:Originally posted by Mick100


As usual, your getting bogged down in the details and missing the big picture again Snoopy.

It is my job to remind people about the details Mick, just as it is yours to remind us of the 'big picture' :-)

quote:
What do you think is going to happen to food prices when a big chunk of the world's arable land is being used to grow crops for bio fuel production?

Perhaps nothing. If the US stops subsidizing their farmers, and shunting them across to producing bioethanol might be an economic way to do that, then some of the third world ag food producers might be able to get their act together. On wages of NZ25c/hour I don't see food prices rising too much.

quote:
The main source of protien in asian diets comes from chicken. What do you think is going to happen to food prices if every last chicken is wiped out by bird flu?

KFC in China will close down for a start. However as a 'YUM' shareholder I can report that in calendar year 2005 KFC opened 324 new chicken restaurants in China, an increase of 20%. Perhaps the fear of bird flu is being overplayed in the general media?

quote:
What do you think the growing middle class (now 200m in china) are going to spend more money on than they did previously? And remember that china's ag productivity levels are already quite high so there's not alot of scope for increased production domestically. Where are they going to get the food from which meets their newly aquired tastes?

Thre is a role for NZ here, to be sure.

quote:
World food prices are going to be heading north in my opinion and although NZ is no longer the cheapest producer of meat and dairy products it is still a more efficient producer than most other countries in the world. PGW has the lions share of farm retail business so they do stand to benefit from rising world food prices.

So the world prices of dairy products are going to be controlled by Argentina, but for NZ producers their costs will be in stubbornly high kiwi dollars? That doesn't sound like a certain recipe for prosperity of the kiwi farmer!

When it comes down to it Mick, you are a self declared 'food commodity bull'. As such, if your own projected scenario comes to pass, it matters not if you buy your PGW shares at $1.50 or $2.50. Your returns will only drop from 'absolutely incredible' to 'fantastic' if you purchase your PGW shares towards the high end of my just mentioned price band.

They say if there is a 'gold rush', the best business plan is not to dig for nuggets yourself but sell spades. As 'spade sellers' I think PGW is well placed to benefit from any uplift of the agricultural sector. Whereas my heart has me looking at indirectly owned Fronterra shares, my head tells me they will be overpriced. Short of owning a farm myself, I think PGW (the leading farm retailer) is the place to be if I want to take advantage of living in the land where 'anything grows'. I am not a seller. But neither am I a buyer at current prices.

A lot of water has to flow under the bridge before NZ farmers conquer Asia.