Agribusiness has always been an iconic part of ASX’s history and identity. From the origins of our derivatives market as the Sydney Greasy Wool Futures Exchange through to today’s capital markets, ASX’s involvement in the agribusiness sector is broad and deep.
Over the coming decades, primary industries, such as food and fibre will be shaped by multiple interacting changes and challenges. In a recent ABARE report[i], five megatrends were identified that are shaping the primary industry sector in Australia and globally. These are:
Financing this dramatic transformation in primary production will necessitate and drive increasing demand for capital and investment.
Indices play an important role in attracting investment capital and enabling market performance to be measured and monitored. Most people are familiar with ASX’s key market indices – such as the S&P/ASX 200 Index or one of the many sector-specific indices such as the S&P/ASX 200 Resources Index or the S&P/ASX All Technology Index, which was launched in February 2020.
Inclusion in an index means a greater profile for the index constituents. Importantly, it attracts investment from passive and active index-tracking managed and Exchange Traded Funds (ETFs). Given the prominence of the agribusiness sector in Australia, it is perhaps surprising that until now, there hasn’t been a benchmark representative of the sector.
In partnership with S&P Dow Jones Indices, ASX has launched the S&P/ASX Agribusiness Index (or AgBiz Index for short), setting a new benchmark for monitoring the performance of ASX-listed primary production companies across a range of different subindustries.
The AgBiz Index constituents are drawn from the top 1,000 ASX listed companies (by free-float adjusted market capitalisation). The index not only contains agricultural product producers but will also contain constituents from fertilizer and agricultural chemicals, paper products, food distributors, brewers, distillers and vintners, packaged foods and meats, pharmaceuticals (including medicinal cannabis), water utilities, and rural land Australian Real Estate Investment Trusts (A-REITs).
The Index has a single index constituent cap of 10% to ensure no single company dominates. Launched as an end-of-day index on 31 May 2022, it converted to a real-time index on 1 July, enabling fund managers to track performance accurately to market moves during the trading day.
Through the S&P/ASX Agribusiness Index, ASX is bringing greater awareness to this important sector and supporting agribusinesses to grow and prosper by enabling them to tap into one of the deepest pools of investment capital worldwide. Additionally, the Index provides new and exciting opportunities for investors to build long-term wealth by assisting companies grow to meet the future challenges of feeding a hungry planet.
[i] Source: Stocktake of Megatrends shaping Australian Agriculture (2021), ABARES