AAP Projects

Well Patawalonga, it looks like you might have been right about the cherries:

China may target American cherries, pistachios and sparkling wine

I got a chance to talk to the management earlier this year. Initially, the conversation was centred around the 'Barnea' variety of olive tree that are currently being replanted, however a casual mention was made regarding a review conducted by the company last year on a number of different agricultural projects to test which would stack up economically.

I found this intriguing, so I decided to shift the focus of the conversation to the review of the potential new projects, and followed up with a number of questions on this topic.

I'll list the questions and answers below, but bear in mind I'm going off memory here, and so it is possible there may be some errors in my recollection.

Firstly, I asked what agricultural projects did the company consider to be viable following on from the review?. They  said that the review found that there were three types of ag projects that made sense:

1. More Olives
2. Almonds.
3. A combination of forestry and sheep farming.

I then asked if the sheep farming referred to above was for wool or meat?. They said it was the latter.

Given that they seemed to think almonds would be a viable project, I then asked if other tree crops such as walnuts and pistachios would work out equally well?.

The response to this was that scale was needed to make such projects work: I think they said that around 400 hectares would be the minimum size required for a tree nut plantation. To summarise, it seemed to me that their concern was that these crops were too niche and as a result they might end up flooding the market and end up driving down prices.

I have to confess I was a little sceptical about this argument: for example, if you look at figures quoted above in that CNN article, the US exports over $30 million dollars of both walnuts and pistachios to China alone each year. So I'm not sure if there is really very much danger that little AAP would end up flooding the market with any type of nut. I guess it is possible he may have just had the Australian market in mind, however.

Anyway, I would assume that their apparent lack of enthusiasm for the cherries was probably grounded on similar logic.

One other thing that is probably worth bringing up is that it didn't sound like that they are planning on initiating any of the suggested new agri projects in the near future. I got the impression that over the next few months the focus of the company would be on replanting those troubled Barnea trees, so any potential new project would be at least several months away.