Elders plummets -25% as climate change delays crops, hurts “sentiment”

Australian agricultural giant Elders (ASX:ELD) has seen its share price tank -25% on Monday morning to $7.38 as the company highlighted climate change is hurting its bottom line.

While the company pointed towards lower crop protection prices impacting its insurance operations, and livestock prices sitting below the ten year mean, extraneous risks to the company’s operations remain in focus.

“First half trading for FY24 was significantly below expectations,” the company wrote on Monday.

“Subdued client sentiment” was quoted in a release from Elders which it linked to the BOM’s EL Nino declaration. All in all, profits could be hit by up to -30%. The company expects weather conditions to return to ‘neutral’ by late May, but the damage has already been done.

Subdued client sentiment is one way to put it. What this means is that growers are expecting smaller yields due to El Nino, which means they’re accessing Elders non-growing-services products less.

Then you’ve got the fact that the WA winter crop has started later than usual. While soil conditions on the east coast remain favourable, a lot of soil in WA remains dry.

The company was brief in its assessment of what troubles in WA will bring, describing WA only as a “key broadacre market.” It doesn’t help that WA livestock prices are fetching less than they are in the eastern states.

In other words, the West Australian wheatbelt is a massive money maker for Elders – and ever-increasing summer heat is drying out the soul in this region. A ton of wheat from Kwinana currently costs $380/tn on the market after recent increases – something Elders will now miss out on.

Clearly, with the stock diving 25%, the writing on the wall wasn’t missed by the market on Monday.

“Conditions remain dry and warm in some parts of Western Australia which will push sales into the second half of FY24,” Elders wrote.

Underlying earnings before costs are expected to be between $120-$140M for the full FY24.

ELD shares last traded at $7.38.