Agricultural Commodity Stock - China Milk

Something I find interesting and the price very appetising.
It has with other China stocks badly beaten up, dropping ( 60%) from a high of 1.63 to now 67 cents.
1 - cheap

2 - recession proof

3 - good ride on agriculture commodity play. Agricultural commodity run is in its infant stage. The metal commodities with all the infrastructure boom has started from 1999 to now. For Agricultural Commodity, I believe it started around 2003, which means it has 4-5 more years to run to catch up with the metal commodities. And at presently, AC is at 1st of 3 stages.

4 - a recent report which mentions that funds have the intention to put 10% of their money to agricultural commoditiy stocks.

5 - A remark by China's prime minister Wen Jiabao: "I have a dream - a dream to be able to provide all Chinese, especially our children, with half a litre of milk a day." The result has been a huge increase in milk consumption in China and demand is growing at a rate of around 25% a year. China’s milk consumption continues to be spurred by consumers demanding healthier and more nutritious foods. With rising affluence in the world’s fast-growing consumer market, there is a rapidly growing penchant for international food and beverage concepts which use a lot of milk and milk products. The PRC government has also been promoting the need for nutrition as evidenced by the government’s nation-wide School Milk Programme.

Why China Milk,
- With limited pasture land, China cannot continue to increase the number of cows to enhance its milk supply. China has much to catch up in terms of improving the milk yield of its cows.
- Based in the Heilongjiang Province, our subsidiary is the largest company specialising in the production of bull semen, dairy cow embryos and raw milk in China *
* According to China Dairy Industry Association

- It is building a 150 000 tonnes raw milk processing factory. They have signed a contract to provide OEM with raw milk, As of Jan qtr report, it has installed the milk machines by early march and will commence trial production for 1 month.

- The outbreak of mad cow disease in Canada and the U.S. in 2003 knocked the North American cattle industry on its back. The largest importers of U.S. and Canadian beef, including Japan, South Korea, and China, banned the import of beef from North America. But for China Milk Products, the restrictions proved to be a blessing in disguise. The privately owned raw milk company had already purchased 970 Canadian Holstein cattle. Its state-owned rivals failed to import as many cattle because they had to navigate government bureaucracy to get bank loans. Today, China Milk owns the largest herd of Holstein cattle in China and ranks 50th in BusinessWeek's annual Hot Growth rankings of Asia companies
Any rancher wanting to breed his cows with a Canadian Holstein has to go to China Milk. The company charges its customers $9.50 per sample of bull semen from a Canadian Holstein, compared with $6.75 from Australian Holsteins and $2.70 from Chinese Holsteins. However, Chinese ranchers are still willing to pay a premium for Canadian Holsteins, especially after receiving a little help from the government.
Starting this year, the Chinese government is giving Chinese ranchers a subsidy of $2 toward each sample of bull semen.

- China consumption of dairy products is about 20kg in 2006. It is a low base compared to other countries. With a greater awareness of nourishment with drinking of milk, and better life style (ice cream/butter/ yoghurt), demand will continue to increase

- Tourism will continue to be strong after the China Olympics. With more Ang mos visiting China, they will want their daily milk, butter, pasta, yoghurt, boosting demand.