Tandou's acquisition only half the story

The acquisition of more than $30 million in water and land assets announcement by Tandou this morning isn’t the only positive development for the farming group.

The acquisition of more than $30 million in water and land assets announcement by Tandou (TAN) this morning isn’t the only positive development for the farming group.

Tandou said it would buy 34,585 megalitres of water entitlements worth $24.8 million and 7450 hectares of land close to its existing Riverina cropping operations in New South Wales for around $8.4 million.

The deals will bolster Tandou’s cotton production facility to over 110,000 bales a year, but the bigger short-term driver of sentiment is the cotton price.

Most investors would have missed the rebound in the price of the soft commodity to a near 1 ½-month high of US79.8 cents a pound.

There were worries that cotton would fall to US70 cents per pound but the soft commodity bounced from the important support level of US75 cents a pound.

More significantly, the price of cotton has now broken above US78 cents a pound, a level that would attract sellers.

A rising cotton price and weakening Australian dollar would make the latest deals more attractive than some might suspect.

Tandou (TAN), which is part of the Uncapped 100, was trading flat this morning at 49 cents.


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