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Fonterra Shareholders Fund, expanding its product reach

Team Veye | 28 Jan 2021 ASX - FSF
Fonterra Shareholders Fund, expanding its product reach

Fonterra Shareholders Fund (ASX: FSF)

Fonterra Shareholders Fund  (ASX: FSF)

Sale of wholly owned China Farms receives anti-trust clearance

Fonterra Shareholders Fund (ASX: FSF) on 23 December 2020 received the anti-trust clearance for the transaction that was announced in October 2020. Fonterra agreed to sell its two wholly-owned farming hubs in China to Inner Mongolia Natural Dairy Co. Ltd, a subsidiary of China Youran Dairy Group Limited (Youran). The transaction was subjected to anti-trust clearance and other regulatory approvals in China. The transaction is subjected to obtain the remaining regulatory approvals in China and the transaction is expected to complete within this financial year

(Chart source: TradingView)

Global Dairy Update November 2020

On 4 December 2020, the company provided an update on its quarterly performance

  • New Zealand milk production reported a 0.8% increment on a litres basis (up 0.3% on a milk solids basis) in October compared to October last year. The dry conditions affected the soil moisture levels, especially in the North Island resulting in slow production growth in October. New Zealand milk production for the 12 months to October was 0.6% higher than last year.
  • Australia milk production was down by 0.3% in October compared to October last year. Milk production slowed in October as challenging wetter than usual spring conditions affected regions such as Victoria and Tasmania. Forecasted production for 2020/21 season to be between 1%-3% Australia milk production for the 12 months to October was 2.5% higher than last year.
  • EU (including UK) milk production was up by 1.2% in September compared to the same period last year, the strongest production growth since February this year. The increase in production was observed across most countries and notably led by Poland (up 2.6%), Spain (2.2%), Italy and France (1.1% each). EU milk production for the 12 months to September increased by 0.2% compared to the same period last year.
  • US milk production was up by 2.3% in October compared to the same period last year. Higher production volumes in October were driven by stronger milk yields and rapidly growing herd sizes combined with lower culling rates. Milk production for the 12 months to October was 1.8% higher compared to the same period last year.
  • Australia's dairy exports increased by 13.5% or 7,660 MT, in September compared to the same period last year. This was primarily driven by increased demand for SMP and fluid milk products. Exports for the 12 months to September were down 4.5%, or 34,884 MT, on the previous comparable period
  • US dairy exports were up by 4.4%, or 8,322 MT, in September compared to the same period last year. Exports for the 12 months to September 2020 were up 12.3%, or 273,366 MT on the previous comparable period
  • EU (including UK) dairy exports decreased by 3.7% or 17,724 MT, in August compared to the same period last year.
  • Total New Zealand dairy exports decreased by 0.4% or 815 MT, in September compared to the same period last year.
  • Fonterra’s season-to-date New Zealand milk collection reached 527 million kgMS at the end of October, flat on the prior season.
  • Fonterra's Australia milk collection for October decreased 7.7% to 12.4 million kgMS, compared to last season (Data Source – Company Reports)

 

Veye’s Take

Fonterra has entered a sales and marketing agreement with one of America’s leading dairy co-operatives, Land O’Lakes. The arrangement will give the Co-op opportunities to expand the reach of Fonterra’s foodservice products into other US foodservice outlets. The stock has managed to hold above the middle Bollinger band for a long time. RSI and MACD positive crossovers together with price chart pattern indicate the stock has upside potential. Veye recommends “Buy” on “Fonterra Shareholders Fund” at the current price of $4.26

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