Agribusiness XAG index launched by ASX to reap the rewards of growing agribusiness sector

Investors can now get full access to any profits from the booming agri sector through the S&P/ASX Agribusiness Index (XAG)  

Treasury Wine Estates TWE with a market cap of $7.99 billion and well known brands such as Penfold in its arsenal heads the 25 S&P/ASX Agribusiness Index (XAG) listed companies that make up a new index to tap into burgeoning agribusinesses profits

From its initial launchS&P/ASX Agribusiness Index (XAG)will include 25 companies that are involved in the primary production of agricultural products.

Armed with instant access to the booming agribusiness sector this broad-based index will allow investors to indent more easily the players in Australia’s agribusiness sector and readily track the performance through ASX and S&P Dow Jones Indices.

The criteria to join the S&P/ASX Agribusiness Index (XAG) was for participants to be ASX-listed companies whose principal business activity is either in the primary production of agricultural products or in the production of commodities used as inputs into these products.

Of those 25 companies that made the cut, their total market capitalisation is almost $30 billion for the launch of the AgBiz Index.

Some well-known names didn’t make the list for varying reasons, but those that did include GrainCorp, A2 Milk, Nufarm, Elders, Bega Cheese and the top ranked contenter on the list Treasury Wine Estates TWE with a market cap of $7.99 billion.

“The profile of the agribusiness sector is hampered by the absence of an index benchmark akin to mining, energy, banking, property, healthcare or technology,” said ASX head of strategic delivery, capital markets, Ken Chapman.

“By raising the profile of the sector, the AgBiz Index will increase investor understanding and interest, and be a critical ingredient in priming the market for the next phase of agricultural innovation.”

The S&P/ASX Agribusiness Index (XAG) will tell you everything you need to know about the leading participants in primary production of agricultural products

To be included in the index, companies must be among the top 1,000 ASX-listed securities and meet minimum float-adjusted market cap, daily traded value and liquidity thresholds.

ASX said the index would include 11 sub-industries in total such as brewers, packaged foods and meats, paper products, fertilisers and agricultural chemicals, distillers and vintners.

“By creating the AgBiz Index, ASX is supporting agribusinesses to grow and meet the Delivering Ag2030 goal of becoming a $100-billion industry by 2030,” added Ken Chapman.

“For many investors, the recent market volatility has highlighted the benefits of a diversified investment portfolio and of quality counter-cyclical stocks, such as those in the agribusiness sector.

The AgBiz index does not have a set number of constituents, which can change at each semi-annual rebalance along with their respective weights.

The index will officially commence as a real-time index from 1 July 2022, but is currently being calculated on an end-of-day basis until then.

“We are honoured to collaborate with ASX and jointly bring this timely S&P/ASX Agribusiness Index to life, which aligns with the goal of the Australian Government to expand the agribusiness industry,” said S&P Dow Jones Indices head of ESG and innovation, Reid Steadman.

“This innovative index reflects the market’s heightened awareness of the need for sustainable agriculture. It will also serve as a valuable tool for investors seeking to gain exposure to this vital driver of Australia’s economy,” Reid Steadman concluded.

A graph of the top 20 ASX agribusinesses XAG, based on market cap, since 2015 is shown below. More information about the XAG index can be accessed on this link.