Aussie cheesemaker's best days are behind it, warns Goldman Sachs

Charts and Caffeine

Livewire Markets

Welcome to Charts and Caffeine - Livewire's pre-market open news and analysis wrap. We'll get you across the overnight session and share our best insights to get you better set for the investing day ahead.

MARKETS WRAP

S&P 500 - 3,863.16 (1.92%)

NASDAQ – 11,452.42 (1.79%)

FTSE 100 - 7,159 (1.69%)

EURO STOXX 600 – 413.78 (2.76%)

USD INDEX – 107.98

US10YR – -0.06%

WTI CRUDE - US$94.57/bbl

THE CALENDAR

THE CHART

Courtesy of research and wealth management group Calastone, the numbers above paint a pretty dismal picture for Australian managed funds in the June quarter. 

Waving goodbye to more than $2 billion over the three-month period – local fundies’ worst period since records began – outflows topped $250 million in June alone, as Livewire’s Hans Lee wrote late last week.

Funds
Calastone: Investors cashed out $2 billion from managed funds in the June quarter

STOCKS TO WATCH

The rising price of groceries – $12 lettuce, anyone? – is one of the most tangible illustrations of cost inflation at work. Of course, record rainfall and flooding across large parts of Australia are also to blame for the food inflation we’ve seen locally. And it’s not just fruit and veg prices that have spiralled upwards – milk is also increasingly expensive. There are several reasons for this, including a red-hot bidding war in the farmgate milk prices offered by processors, Goldman Sachs analysts Michael Peet and Sophie Carran explain in a recent note. This is a key reason the broker has maintained its SELL rating on Bega Cheese (ASX: BGA), noting this environment is a huge margin headwind for the company.

Peet and Carran regard the industry as “structurally challenged” and “despite record high milk prices, it’s uncertain if or when milk supply will increase significantly.” Seeing zero upside in BGA’s latest closing price of $3.25, they note there may also be further downside risk if:

  • the company can’t secure enough milk, 
  • global commodity prices soften, or 
  • it can’t bump up retail prices enough. 

This comes at the same time as cost headwinds mount in pushing up the prices of transport, labour, refrigeration and energy.

THE QUOTE

“The moment we establish a foreign military base, we immediately become an enemy and position our country and our people as targets for potential military strikes, and the Solomon islands’ Government would never allow that.”

Solomon Islands Prime Minister Manasseh Sogavare in Suva, Fiji on Wednesday 13 July.

Diplomatic ties between Australia and China remain strained, even amid signs of improvement in recent weeks after positive engagement between the new Federal Government’s foreign minister, Penny Wong and her Chinese counterparts. But another concern from the Asia Pacific region was alleviated at the Pacific Islands Forum last week. Australian Prime Minister Anthony Albanese was assured by his Solomon Islands counterpart that his country would never allow an established Chinese military presence.

Today's report was written by Glenn Freeman

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Charts and Caffeine
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Charts and Caffeine is Livewire's daily pre-market news and analysis wrap. Every day, Livewire's team of market journalists and editors get you across the overnight session and share their best insights to get you better set for the investing day...

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