Nufarm says lower crop input costs could encourage farmers

Lower costs for many key farm inputs could encourage farmers, the managing director of crop protection concern Nufarm Ltd. said Thursday (Apr 23), while reiterating a full-year profit forecast within previous guidance.

 

The balance of Nufarm's financial year that ends July 31 is expected to see strong demand for the company's products as Australian, North American and European farmers approach key planting periods, said Doug Rathbone.

 

"With several farm input costs, in particular fertiliser and fuel, below levels of last year, and many soft commodity prices still well above their five-year averages, growers have a strong economic incentive to utilize crop protection products to maximise yields," Rathbone said in a half yearly report to shareholders.

 

In Australia, the southeast needs additional autumn rains to support planting activity for winter crops, but other cropping regions including Western Australia, Queensland and much of New South Wales are well placed in terms of soil moisture profiles, he said.

 

"Demand for the company's extensive range of products is expected to be strong," he said.

 

Rabobank Australia said earlier that early predictions for Australian wheat plantings are for a slight reduction in area from that planted last crop year ended March 31 which produced a 21.4-million tonne wheat crop, especially if dry conditions prevail in the southeast. Better seasonal conditions elsewhere could partly offset this fall.

 

Assuming average seasonal and climatic conditions, Nufarm remains "on track" to generate an operating net profit of about A$220 million this fiscal year, which is within the range of previous guidance, he said.

 

Looking offshore, Rathbone said improved distribution penetration, more products and selling opportunities in new crop segments are forecast to generate "excellent" second-half performances from the North American and European businesses.

 

But credit-related issues continue to affect business in Brazil, where Nufarm will continue to manage its operations to minimise risk exposure. The full-year contribution from Brazil is expected to be below that recorded at the half year due to lower second-half sales, reduced margins and the costs associated with maintaining existing operations and new product development activity, he said.

 

US$1 = A$1.412 (Apr 23)