DUXTON FARMS LTD — Net Asset Value 2019

Dec 18, 2019

Statutory NAV per share: $1.7145 (30 June 2019)

Market Cap (30 November 2019) $50,942,800 (at $1.19 per share)

30 November 2019

COMPANY SNAPSHOT

COMPANY NAME INVESTMENT MANAGER PORTFOLIO Duxton Broadacre Farms Limited Duxton Capital (Australia) 4 broadacre aggregations LOCATIONS HECTARES WATER ENTITLEMENTS (ML) Forbes and West Wyalong, NSW 21,445 owned 8,670 owned Naracoorte, SA 6,798 leased

Duxton Broadacre Farms Limited (DBF/Company) presents investors with a unique opportunity to participate directly in the Australian broadacre cropping industry and the possibility to provide shareholders with both ongoing annual operational yield and longer-term capital growth. DBF intends to achieve this through the acquisition and aggregation of land rich parcels into its existing portfolio of diversified high-quality farms, to improve operational efficiencies and the diversification of commodities produced to satisfy the longterm growth in global grain demand.

INVESTMENT AND OPERATIONAL UPDATE

SHARE BUY-BACK

The share buy-back continued this month, with the on-market acquisition of 3,951 shares. This brings the total number of shares bought under the buyback to 724,623, with the Company being able to acquire up to 735,477 additional shares. On the 25th of November the Company extended the existing buy-back program to a limit of 4,307,728 shares over the next twelve months. The intent of the buyback is to enable DBF to acquire shares in the event the Board determines they are trading at a discount to intrinsic value. The capacity to issue an additional 10% of total shares on issue received shareholder approval at the Annual General Meeting held on the 27th of November. The Company has no current intention to issue any shares beyond those already allocated for Director and employee remuneration. The Company does not have a current intention to issue shares at a significant discount to book value.

IRRIGATION

The ongoing rollout of the irrigation development program continued over November. The irrigation development projects are aligned with the Company’s broader risk mitigation strategy by seeking to increase water security, visibility, and operational flexibility. The newly built storage and channel systems are functional and have been utilised during the month for the irrigation of cotton. The new irrigation infrastructure will provide improved efficiency and flexibility for irrigation of cotton this season. The new bore motor has been successfully installed during the month and will assist in ensuring the bore is functioning efficiently for the cotton season. The successful production bore at Walla Wallah has had an application lodged with State Water, which is awaiting approval. The hydrological survey at Timberscombe has continued during the month to identify areas that may be potential locations for further production bores.

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DUXTON CAPITAL (AUSTRALIA) PTY LTD DUXTON HOUSE. 7 POMONA ROAD STIRLING SA AUSTRALIA 5152 [+61]8 8130 9500

Statutory NAV per share: $1.7145 (30 June 2019) Market Cap (30 November 2019) $50,942,800 (at $1.19 per share)

30 November 2019

SUMMER CROPS

Cotton that was planted during October has established well and is receiving irrigation as required. The small trial plot of cotton under a fully biodegradable/dissolvable film is developing well and will continue to be monitored during the season. The film operates by creating a greenhouse effect that assists in retaining heat in the soil, ultimately promoting early development of the cotton seed. This facilitates a longer growing period to maximise yield.

LIVESTOCK

DBF continues to maintain adequate reserves of fodder for livestock to facilitate the ongoing fattening and wellbeing of stock. Some stock is lightly grazing on post-harvest stubble, but ground cover will be maintained to protect soils. An additional area of Lucerne was planted during the month and will be utilised as feed over summer. The sale of stock continued over the month with favourable livestock prices continuing. Additional stock is being purchased as opportunities arise.

WINTER CROPS

Harvest commenced during the month. Most of the dryland crops have been harvested with only some irrigated crops remaining. Sales of the new season crops will commence in the following months in accordance with DBF’s commodity marketing strategy. Grain crops with expected suboptimal yields were opportunistically cut for hay to take advantage of the relative yield as well as subsequent revenue potential. Some grain crops were also grazed by livestock to maximise return.

DOMESTIC GRAIN PRICE CHANGES PAST 12 MONTHS*

CROP	CURRENT PRICE (per tonne)	PRICE 12 MONTHS AGO	PERCENTAGE CHANGE
Feed Wheat	$380	$440	-14%
Feed	$357	$410	-13%
Barley
Cotton	$559/bale	$589/bale	-5%

*** data retrieved from ABARES weekly commodity reports**

DOMESTIC CROP INDICATOR PRICES

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BOORALA

November was the beginning of a very busy period at Boorala. In terms of livestock operations, over 3,000 lambs were sold in November. Remaining lambs will be shorn and fattened on crop stubble over the coming months for marketing in the new year. November was also busy for cropping operations with preparations commencing for harvest which is expected to peak over December as temperatures rise. Hay was cut midway through the month following a period of rain. Due to a period of cooler weather this has been slow to dry and will be baled in early December. In preparation for harvest, canola has been windrowed and bean crops have been desiccated.

LOCAL WEATHER

Central-west New South Wales (NSW) recorded November rainfall of 11.8mm. Compared to the historic average of 45.5mm, this represents a quarter of November’s average rainfall. The mean temperature for November was 29.7°C, above the long-term average of 29°C. In south-east South Australia (SA), November recorded rainfall of 40.2mm compared to the historic average of 34.2mm. The mean temperature for November was 22.0°C. This is below the longterm average for the region by 2.6°C.

The hot and dry conditions experienced throughout Australia this year continued. November was the tenth warmest and the driest on record for Australia. It has been the second warmest and second driest January to November period on record for Australia as a whole. The Bureau of Meteorology’s (BoM) climate outlook for December has predicted a 75-80% chance of rainfall below the long-term median of 25-50mm and a 75-80% chance of temperatures exceeding the long-term median of 30-33°C for central-west NSW. The south-east of SA has a similar outlook with a 70-75% chance of rainfall below the long-term median of 25-50mm and a 55-60% chance of temperatures exceeding the long-term median of 27-30°C.

Nationally, the BoM predicts warmer temperatures both day and night from December through to February. The BoM is predicting that summer weather is likely to continue to be influenced by the positive

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DUXTON CAPITAL (AUSTRALIA) PTY LTD DUXTON HOUSE. 7 POMONA ROAD STIRLING SA AUSTRALIA 5152 [+61]8 8130 9500

Statutory NAV per share: $1.7145 (30 June 2019) Market Cap (30 November 2019) $50,942,800 (at $1.19 per share)

30 November 2019

Indian Ocean Dipole (IOD). Typically, a positive IOD event brings below average winter-spring rainfall and above average temperatures for southern and central Australia. Generally, IOD events have a limited impact on weather during summer. However, due to the strength of the IOD this year and the late start to the monsoon season, the positive IOD is likely to persist into mid-summer. In addition to the positive IOD a negative phase of the Southern Annular Mode (SAM) is expected to continue for the remainder of 2019. A negative SAM during summer typically results in drier conditions across eastern Australia.

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Cutting hay at Boorala
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AUSTRALIAN MARKET INSIGHTS

CROP PRICES

During November, Australian wheat prices remained flat to close the month at $380/t. Barley prices fell $3/t during November to $357/t. Pricing fluctuations at this time of year can be attributed to forecast climatic conditions and demand in the market. The latest climate forecasts for the remainder of 2019 have predicted a hot and dry finish for the year. With conditions looking unlikely to improve, several farmers are making the decision to cut crops for hay instead of finishing them. Further downgrades are expected for the national wheat and barley crop in the coming months. Low levels of production this year could result in upwards price pressure. There exists some downside risk to grain prices that could be attributed to lower barley exports following the Chinese anti-dumping investigations earlier in the year, and the recent supply of Canadian grain to the Australian market. In both cases the impact of this on local supply could affect prices.

COTTON PRICES

International cotton prices rose slightly during November to finish the month at 75.6USc/lb. The new ‘phase one’ trade agreement between the US and China continues to influence prices¹. Mixed reporting from the two countries during the month resulted in markets trading within a narrow band. Failure by the two countries to reach a ‘phase one’ agreement is expected to result in additional tariff increases in mid-December. The latest supply outlooks by Cotlook have seen forecast tonnage for the 2019/20 season decrease by 245,000 tonnes to 26.25 million tonnes. The reduction in production was mainly due to a reduction in expected production from the US and Pakistan. Pakistan is expected to produce 1.37 million tonnes. This

1. Cotlook Limited. 2019. November 2019 Market Summary

WOOL EASTERN MARKET INDICATOR

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DUXTON CAPITAL (AUSTRALIA) PTY LTD DUXTON HOUSE. 7 POMONA ROAD STIRLING SA AUSTRALIA 5152 [+61]8 8130 9500

Statutory NAV per share: $1.7145 (30 June 2019) Market Cap (30 November 2019) $50,942,800 (at $1.19 per share)

30 November 2019

is nearly 30% below the production expectations that Cotlook had in February. Global cotton consumption is forecast at 25.6 million tonnes for 2019/20. Stock levels at the end of the year are likely to rise by over 650,000 tonnes.

CROP PRODUCTION

During the month the International Grains Council (IGC) forecast for grain production for the 2019/20 season has been maintained at 27.6 million tonnes. December will see the release of the latest Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Australian crop report. It is expected that the new report will downgrade ABARES’s previous production forecast of 33.6 million tonnes.

WOOL PRICES

November saw wool prices initially rise before declining at the end of the month to finish at a slightly higher level than October. Prices started the month by jumping 3.2% as competition between major buyers increased. Currently, prices are being highly influenced by immediate demand requirements. Price declines during the month were attributed to immediate needs being met at previous sales and a cautious approach from buyers². Wool growers during the month continued to utilise the ability to pass-in their wool if their reserve price was not met. This assists in reducing the supply of wool available for sale and helps to stabilise prices. If not correctly managed, passing in wool for an extended period can result in a large stockpile and therefore supressed prices.

2. Australian Wool Innovation Limited. 2019. Weekly Price Report

DOMESTIC LIVESTOCK PRICE CHANGES PAST 12 MONTHS*

LIVESTOCK	CURRENT PRICE	PRICE 12 MONTHS AGO	PERCENTAGE
	(per kg)		CHANGE
Beef	$5.13	$5.28	-3%
Lamb	$7.18	$6.93	4%
Wool	$15.55	$18.58	-16%

*** data retrieved from ABARES weekly commodity reports**

AUSTRALIAN LIVESTOCK PRICES

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Beef Eastern Young Cattle Indicator Lamb Eastern Trade Indicator

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DUXTON CAPITAL (AUSTRALIA) PTY LTD DUXTON HOUSE. 7 POMONA ROAD STIRLING SA AUSTRALIA 5152 [+61]8 8130 9500

Statutory NAV per share: $1.7145 (30 June 2019) Market Cap (30 November 2019) $50,942,800 (at $1.19 per share)

30 November 2019

LIVESTOCK PRICES

The Australian Eastern Young Cattle Indicator (EYCI) initially rose at the start of the month to reach $5.22/kg, before falling to finish the month at $5.13/kg. The rise in price can be attributed to renewed interest from restockers and northern processors³. Demand for finished cattle appears to be accelerating, with export prices hitting all-time highs. Prices are being supported by surging demand for Australian beef as African Swine Fever continues to impact Asia’s supply of meat protein and an Australian dollar that is at 10-year lows. Pork prices have been rising in China since June as pork stocks begin to dwindle. This is placing upwards pressure on beef prices. Lamb prices have fallen during the month by $0.54/kg to finish the month at $7.18/kg. The reduction in price is attributed to new season Victorian lambs entering the market⁴. The downward trend is not surprising as October and November see the highest levels of lamb supply for the year. Typically lamb supply increases by 14% from the yearly average in October and by 29% in November. While prices have trended downwards over the past few months the lamb market is still very strong, and prices are currently $0.25/kg above this time last year.

a delay in plantings are expected to result in decreased production as a smaller area is harvested and yields are lower. The EU maize crop continues to be impacted by heatwaves and rainfall is affecting harvesting in France and Germany. Soybeans are showing favourable conditions globally with only some minor areas in Argentina being impacted by dry conditions and some areas of Canada impacted by wet weather. Conditions for rice are mixed with several countries experiencing adverse conditions. This includes flooding in Thailand, water shortages in Indonesia and drought conditions in Vietnam. The two largest rice producing nations, China and India, are currently experiencing favourable conditions.

PRODUCTION

During the month, forecasts for the 2019/20 grain season have risen slightly. The rise in production is attributed to improved yields for maize. The 2019/20 grain season is forecast to produce 2,162 million tonnes of grain. For reference, the average world total annual grain production for the past 10 years has been 1,994 million tonnes. Overall wheat production is projected to be up year-on-year by 29 million tonnes.

GRAIN PRICES

GLOBAL MARKET INSIGHTS

WEATHER

Weather conditions during the month have been mixed with several countries showing favourable conditions while others are struggling due to adverse weather patterns. Dry conditions in Australia, Argentina, the United States and Ukraine as well as wet conditions in Canada and the EU, are impacting the wheat crop. Wet weather in the US and dry conditions in the EU are impacting the maize crop. Wet conditions in Canada and dry conditions in Argentina are impacting the soybean crop⁵. Globally, the winter wheat crop continues to be impacted by adverse conditions in several countries. These conditions could result in reduced yield in several major producing countries, including the EU, Ukraine and Canada. Currently conditions in China, India and Russia are favourable. Harvest of the US maize crop has continued during the month. Wet weather and

Grain prices are influenced by several factors including, but not limited to, supply and demand, political risk, global economic conditions, and weather. The IGC global grain and oilseed index declined during the month, as average export prices for rice, soybeans, and wheat fell. The wheat index finished November down 2.8%. The wheat index is down 7.5% year on year. The wheat index fell during the month as excess supply in the market constrained prices. The soybean index was 1.9% lower than last month. The maize index rose by 2.4% during the month. The rise was due to continued strong export demand for South American maize which offset falls in US prices.

3. Meat and Livestock Australia (MLA). 2019. EYCI supported by processor competition

4. Meat and Livestock Australia (MLA). 2019. Lamb prices ease as Victorian supply takes over

5. Agricultural Market Information System (AMIS). (2019). Market Monitor December 2019

This factsheet is prepared by Duxton Capital (Australia) Pty Ltd [ACN: 164 225 647; AFSL no. 450218] (“Duxton Capital (Australia)”). Duxton Capital (Australia) is the Investment Manager of Duxton Broadacre Farms Limited [ACN 129 249 243] (“Duxton Broadacre Farms”). This factsheet has been prepared for the purposes of providing general information only and does not constitute an offer, invitation, solicitation or recommendation with respect to the purchase or sale of any securities in Duxton Broadacre Farms. Information from this factsheet must not be issued in any jurisdiction where prohibited by law and must not be used in any way that would be contrary to local law or regulation. The forecasts provided are based upon our opinion of the market as at this date and are subject to change, dependent on future changes in the market. Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance. Investments are subject to risks, including possible loss of principal amount invested. The value of shares/ units and their derived income may fall as well as rise. Past performance or any prediction or forecast is not necessarily indicative of future performance. No assurance is given that the investment objective or the targets will be met. This document does not constitute investment, tax, legal or any other form of advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. Investors should study all relevant information and consider whether the investment is appropriate for them. If you require investment or financial advice please contact a regulated financial adviser. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in this presentation. The Duxton Group or its affiliates may hold positions in the securities referred. Where stocks are mentioned, it should not be construed that these are recommendations to buy or sell those stocks. You are not authorized to redistribute this document nor qualified to make any offer, representation or contract on behalf of Duxton Capital (Australia) or its affiliates. Although the information was compiled from sources believed to be reliable, no liability for any error or omission is accepted by Duxton Capital (Australia) or its affiliates or any of their directors or employees. The information and opinions contained may also change. Copyright protection exists in this presentation. To the extent permitted by applicable law, none of the Duxton Group, their affiliates, or any officer or employee of the Duxton Group accepts any liability whatsoever for any direct or consequential loss arising from any use of this factsheet or its contents, including for negligence.

Disclaimer for use of ratings only:

The rating contained in this document is issued by SQM Research Pty Ltd ABN 93 122 592 036 AFSL 421913. SQM Research is an investment research firm that undertakes research on investment products exclusively for its wholesale clients, utilising a proprietary review and star rating system. The SQM Research star rating system is of a general nature and does not take into account the particular circumstances or needs of any specific person. The rating may be subject to change at any time. Only licensed financial advisers may use the SQM Research star rating system in determining whether an investment is appropriate to a person’s particular circumstances or needs. You should read the product disclosure statement and consult a licensed financial adviser before making an investment decision in relation to this investment product. SQM Research receives a fee from the Fund Manager for the research and rating of the managed investment scheme.

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DUXTON CAPITAL (AUSTRALIA) PTY LTD DUXTON HOUSE. 7 POMONA ROAD STIRLING SA AUSTRALIA 5152 [+61]8 8130 9500