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  1. 832 Posts.
    Asa Wahlquist | February 25, 2008
    THE farm sector is gearing up for unprecedented post-drought investment. This autumn farmers will invest at least $3.2 billion in planting winter cereal crops and they are meeting bankers to discuss finance.

    The year could bring the first Australian 30 million tonne wheat crop, National Australia Bank agribusiness general manager Khan Horne said.

    "It would be tremendous for the Australian economy if we do. There is a lot of optimism, but it is reliant upon the weather."

    Australia produced its biggest crop ever, 43.3 billion tonnes of winter cereals including 26 million tonnes of wheat, in the post-drought year of 2003-04, from 21.6 million hectares.

    Planting costs $100 to $200 a hectare, and the typical farm outlays $500,000. For many farmers, that will mean big borrowings, but about a third have money saved in farm management deposits.

    Mr Horne said farmers were facing a number of problems.

    The first was that the cost of fertiliser "has gone through the roof".

    Charlie McElhone, National Farmers Federation economics manager, said chemicals and fertiliser prices had doubled in the past year.

    Several factors were driving up the price, he said, including worldwide efforts to increase grain production and rising oil prices.

    Fertiliser and chemical costs, together with fuel, comprise 15 per cent of total farm cash costs.

    Mr Horne said labour was becoming difficult to find, not only because of the strong economy and low unemployment but because farming and mining had similar skill bases.

    Farm workers and farmers' sons "have fantastic skills at operating big machinery. They are going straight to the mines".

    Graingrower Jock Munro, from Rankins Spring in southern NSW, is worried about estimating his projected wheat returns. This year, for the first time in more than 60 years, AWB, the former Australian Wheat Board, will not hold a monopoly on wheat exports.

    Mr Horne said everyone was waiting for federal legislation on how export wheat would be marketed after June. "We are telling our clients they must be well informed because grain marketing will have a new face."

    Rural borrowings soared during the drought, from $28.5 billion in 2001-02 to $52.8 billion in 2007, the Reserve Bank of Australia says.

    Farm management deposits have remained above $2 billion since June 2003. The scheme allows farmers to reserve money tax free in good years, and withdraw it, and pay tax, in bad years. At June 30, 2007, 40,574 farmers held $2.782 billion in FMDs. "We are seeing indications that people will be drawing on these funds so they can put this crop in," Mr Horne said.

    Commonwealth Bank agribusiness executive general manager Jon Sutton said rapidly rising input prices were a big challenge for farmers, but the high grain prices on offer meant this year was the first in which some commodity prices outstripped cost rises.

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