Eight prime acres of South Australian weed

Tuesday, 4 June 2019
Adelaide, Australia
By Bernd Struben

  • Record Aussie dollar gold prices
  • And the RBA…
  • ‘Hawke’s Tiananmen Square Massacre Response Lauded’

‘Yep, that’s all weed,’ a plant expert called Greg told me. He waved one arm, taking in the horse paddocks and the olive orchard behind them.

This was back in early February.

We were standing at the fence line of the house I’d just moved my family into, nestled in the fringe of the Adelaide Hills.

The house sits on eight acres. And before the movers had even finished unloading the truck, my five-year-old daughter began asking about horses. The neighbours all seem to have them. And look…we have stables, daddy!

Sure, there are stables. But horses eat a lot. And I had my suspicions about the plants that had infested most of the property. Suspicions Greg confirmed.

Of course the weed in question wasn’t cannabis. Eight acres of cannabis would likely see your editor penning the next 10 years of Port Phillip Insiders from inside a jail cell.

The weed, Greg said, was galenia. A rather nasty invader.

According to the New South Wales Department of Private Industries website:

Drought and salt tolerant, galenia grows over and smothers existing vegetation by forming a thick dense mat. It invades coastal dunes, pastures, disturbed areas, lawns, roadsides and rocky outcrop vegetation. Galenia is known to produce nitrates that can be toxic to stock.’

There you have it. The galenia would have to go. And Greg had just the trick.

‘Roundup,’ he pronounced. It only affects broadleaf plants. So, it would kill the galenia, but not the surviving grasses around it. He’d need to spray at least twice and the bill would be upwards of four grand. But he had no doubts he could rid the property of the invasive weed.

‘Erm…have you heard about the health issues being linked to Roundup in the US?’ I asked as we walked back to his ute.

Greg had. But he was dismissive. He’d been using it for 20 years and had no doubt it was safe for pets and people alike. The Aussie government has long given the green light to the herbicide glyphosate. That’s the chemical that packs the weed killing punch in Roundup.

But that could be changing.

The Victorian government has announced it is reviewing the safety of glyphosate. And councils in Sydney are now debating whether to ban glyphosate…and Roundup.

Roundup is a product of US-based Monsanto. Monsanto was acquired by German pharmaceutical behemoth Bayer only last year. But that timing is looking increasingly unfortunate.

From The Sydney Morning Herald (SMH):

In a landmark decision last year, a California jury awarded US$289 million (A$415 million) to a former groundskeeper after finding that Roundup caused his cancer and Monsanto had failed to disclose the serious health risks associated with its use.

A separate lawsuit in US federal court saw US$80 million (A$115 million) awarded to a residential user of the herbicide in early 2019.

Last month, a California couple was awarded US$2 billion (A$2.8 billion) after a jury found their non-Hodgkin lymphoma was caused by decades of exposure to Roundup.

You read that right. That’s a $2.8 billion payout which, if it’s paid, will put a serious crimp in even Bayer’s bottom line.

And the wave of lawsuits looks to be heading Down Under. The SMH reports:

A Melbourne gardener has launched legal action against a global pharmaceutical giant in the first Australian case to link cancer with popular weedkiller Roundup.

Michael Ogalirolo, 54, was diagnosed in 2011 with non-Hodgkin lymphoma, after more than 18 years of exposure to glyphosate, the active component in Roundup.

The dire implications aren’t lost on Aussie agribusiness Nufarm Ltd [ASX:NUF].

While Nufarm doesn’t manufacture glyphosate, it does purchase the chemical to make its own glyphosate-based products. And that’s causing some angst amongst company directors and NUF investors.

Here’s an excerpt of Nufarm’s statement:

While there have not been any lawsuits against Nufarm, in any jurisdiction in which it operates, which relate to glyphosate-based herbicides and alleged impacts on human health, the corporate risk relating to glyphosate has increased, and Nufarm therefore considers that further market disclosure is appropriate,

As a supplier of glyphosate based herbicides, Nufarm is exposed to risk of litigation brought against such suppliers. Nufarm anticipates that as these matters are litigated, the science — which has consistently shown that there is no causal link between glyphosate and cancer — will ultimately prevail.

Nevertheless, Monsanto’s recent US experience has shown that outcome does not necessarily follow in court. Nufarm is assessing and considering this risk very carefully.’

Year-to-date Nufarm’s share price is down 36.4%. The stock is down 13.1% over the past five days alone.

What to do?

If you own Nufarm shares you might want to consider selling them. When these kinds of health scares — legitimate or not — gain traction, they rarely go quietly.

If you’re comfortable with short selling, that’s also worth some further investigation. Even following on this year’s losses, the $1.4 billion company could have a lot further to fall.

And if you tuned into today’s Port Phillip Insider because of the headline, you should check out Sam Volkering’s favourite weed (yes, cannabis) stocks here.

Now, to the markets!

Markets

Overnight, the Dow Jones Industrial Average closed up 4.74  points, or 0.02%.

The S&P 500 closed down 7.61 points, or 0.28%.

Tech stocks in the US took the brunt of ballooning trade war fears yesterday. The tech heavy Nasdaq closed down 1.61%.

In Europe, the Euro Stoxx 50 index finished up 19.79 points, or 0.60%. Meanwhile, the FTSE 100 gained 0.32%, and Germany’s DAX closed up 65.97 points, or 0.56%.

In Asian markets, Japan’s Nikkei 225 is down 37.98 points, or 0.19%. China’s CSI 300 is down 0.82%.

In Australia, the S&P/ASX 200 is up 21.55 points, or 0.34%.

On the commodities markets, West Texas Intermediate crude oil is US$52.93 per barrel. Brent crude is US$60.87 per barrel.

Turning to gold, the yellow metal is trading for US$1,327.13 (AU$1,904.33) per troy ounce. Silver is US$14.78 (AU$21.21) per troy ounce. (More on gold below…)

In the world of cryptocurrencies, one bitcoin is worth US$7,945.15.

Confirming its notoriously volatile status, bitcoin lost more than US$700 in just two hours of trading overnight. It could gain that back just as quickly. But this is certainly no market for the faint-hearted. (Crypto investors…stay informed here.)

The Aussie dollar is worth 69.69 US cents.

Record Aussie dollar gold prices

Getting back to gold, as you can see in the chart below, the yellow metal has been a big beneficiary of rising global jitters:



chart image
Source: Bloomberg
Click to enlarge

The safe haven asset is up 4.2% in US dollar terms since 22 May. Colleague Greg Canavan tells me that at AU$1,904.33 gold is now at record highs in Aussie dollars.

It’s more than just fears that the US-China trade war could spiral out of control that has investors piling into gold.

Central banks around the world, including the US Fed, are increasingly looking to cut rates. The spectre of even lower rates — and what that indicates for the global economy — is providing an additional tailwind for the yellow metal.

And then there’s the central banks ramping up their own bullion purchases.

Our friends over at Legacy Research in the US note that last year, central banks — led by Russia and China — bought some 651 tonnes of gold. That’s up 75% from the year before. And it’s the biggest gold shopping spree by central banks since 1971.

You remember what happened in 1971, right? That was when Richard Nixon took the US dollar off the gold standard.

Putting it all together, the stars are aligning for gold…and gold miners.

Gold miners, as you likely know, are highly leveraged to the price of gold. Meaning when gold goes up by a few percentage points, the best gold stocks can see their share prices surge many times that.

Just have a look at the one-month price chart for Saracen Mineral Holdings Ltd [ASX:SAR] below:



chart image
Source: Google Finance
Click to enlarge

SAR’s share price is up 24.1% since 6 May.

And it’s not just SAR. Here’s the one month price chart for Evolution Mining Ltd [ASX:EVN]:



chart image
Source: Google Finance
Click to enlarge

EVN, with a market cap of $6.9 billion, has seen its share price gain 32.0% since 6 May.

I could go on.

But you get the point.

Now the gold stock gains of the last month are water under the bridge for investors sitting on the sidelines. But with central banks lowering interest rates and snapping up bullion at record rates — and global trade frictions likely to get worse before they get better — last month’s gains could be just the beginning for Australia’s top gold stocks.

If you’re looking to give yourself an edge over the rest of the pack investing in the gold sector, check out what  Harje Ronngard is up to over Gold & Commodities Stock Trader.

Just click here.

And the RBA…

…Slashed interest rates from the record low 1.5% to a new low of 1.25%.

That’s the first move from the central bank since August 2016, when it cut rates from 1.75%. And the signs are still pointing to yet another rate cut later in the year.

At least one reader will be less than pleased.

From subscriber Mike:

It would be better start raising rates not to lower them any more. As we all know no one keeps money in Aussie banks, (no interest on savings or very little) which in itself is a problem. I myself don’t leave a lot of money here, as I do not trust the banks in Oz.’

Good points Mike. But it looks like RBA Governor Philip Lowe has different plans.

We’ll leave off today with another question.

Does the RBA’s latest rate cut fill you with optimism…or dread? More importantly, do you think it will it help or hinder your investment goals?

Send your replies to letters@portphillipinsider.com.au with the subject line ‘rates’. If we print your letter, we’ll only use your first name.

Finally, here’s the latest from The Australian Tribune:

‘Hawke’s Tiananmen Square Massacre Response Lauded’

Today marks 30 years since the Chinese army crushed a student led prodemocracy rally in Tiananmen Square, slaughtering hundreds…perhaps thousands of unarmed protestors. All to maintain the Communist Party’s steely grip on power.

For Lee Cheuk-yan, a survivor of the Tiananmen Square massacre, it ended any hopes of bringing about a peaceful democracy in China. But in recalling...’

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd