Forum Archive Index - August 2001

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

There is no doubt that Wrightson has had a great year, relative to 
last year at least.  Mind you, that would not have been difficult 
;-).   My feeling is that the WRI share price now fully reflects the 
upturn in the rural sector for what in the past has been a cyclical 
trading business.   

The share price ($1.15) must be underpinned by the yield of around 
7% at these levels.   Although even Dr Freeth admits overall farm 
profitability is more likely to go backwards than forwards from 
here, surveys indicate this does not mean the farmers will be 
spending any less on their land.  I feel this indicates that 
Wrightson's current trading levels are probably sustainable for 3-5 
years.  To advance from here my feeling is that the business has to 
go to a 'new level', and become something beyond a traditional 
trading business.   Dr Freeth, Managing Director, has talked about 
leveraging on the company's intellectual capital and the annual 
report talks about the emergence of Wrightson as a 'future solutions' 
company.

The reality of this in terms of supplying wool to carpet 
manufacturers "Feltex" is to cut out the middle man in the wool 
trade.  A sound idea, but hardly what I would describe as a 
'knowledge economy' solution.   More interesting is the 'economic 
farm solution' pilot in the Wairarapa.

The farm solution pilot looks at optimizing farm stocking rates and
improving lambing and calving percentages.  This seems odd to me, as 
I would have thought farmers were already well experienced in these 
areas.  If I was a farmer I certainly would not be getting veterinary 
advice from someone who just sold me a pair of gumboots.   So is it 
Wrightson's intention to go on a hiring spree and get consultants 
from Agriculture New Zealand (a subsidiary of theirs) all over the 
country?   They talk about locking prices for meat and wool into 
futures contracts.  For individual farms  is this a good idea?   
They talked about one farm modelled to achieve a significant net 
gain of $100,000 over 3 years (or $33,000 per year).    Not all that 
flash considering the strength of the current farm upturn I would 
have thought.   And after this is done, what then?   The farmers will 
have had all the advice they need and Wrightson will have to make a 
whole host of highly paid farm consultants redundant?   

Would anyone out there in agriculture be able strip away the hype 
and to enlighten us on the future realities of the Wrightson vision? 
SNOOPY


disclosure: Hold WRI



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