What happened to the GrainCorp share price?
Dominant Australian grain exporter, GrainCorp Ltd [ASX:GNC], is down 4.5% in intraday trading.
The pullback comes after the agribusiness company rallied by more than 17% from mid-December through to yesterday.
Why did this happen to GNC shares?
The share price fall comes after UBS downgraded the stock from Neutral to Sell after the recent share price rally. Their 12-month share price target is now $8.20 — below the current price of $8.85.
UBS also say that the recent rainfall seen on Australia’s east coast has come too late for GNC’s winter crop harvest.
What now for GrainCorp Ltd?
While the recent rain isn’t expected to boost the winter or even summer crop, UBS say that, if sustained, it could improve winter grain planting in May.
And weakness in the Australian dollar will benefit the company. As a weaker Aussie makes Australian grown grain cheaper to overseas buyers.
The broker notes the risk of a takeover of the company’s assets, with Archer-Daniels-Midland [NYSE:ADM] now holding 19.8% of the company’s shares. However, approval of a foreign takeover isn’t expected before to the next federal election. An earlier takeover attempt by ADM was blocked by the federal government in 2013.
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