Agricultural Planting Sector Rises as El Niño and Weather Uncertainty Looms
On July 7, the agricultural planting sector saw a significant rise in stock prices. Shennong Technology led the way with a more than 10% increase, followed by Qiule Seed Industry and Nongfa Seed Industry, both rising by more than 5%. Quanyin Hi-Tech, Dunhuang Seed Industry, Wanxiang Denong, Denghai Seed Industry, and others also experienced upward trends.
This surge in the agricultural sector comes as the country enters the flood season and midsummer season, which are crucial periods for autumn grain production and disaster prevention. The Ministry of Agriculture and Rural Affairs has warned that climate conditions during the flood season may deviate from normal, with visible regional droughts and floods. Furthermore, El Niño is predicted to develop rapidly, leading to more extreme weather events with low probability but high impact. These uncertainties pose additional challenges to agricultural production.
In response to these challenges, the Ministry of Agriculture and Rural Affairs, along with other relevant authorities, recently issued a notice emphasizing the need for problem-oriented, detailed, and practical measures. They urge localities to adopt zoning and classification guidance and make every effort to ensure a successful autumn grain and annual grain harvest.
The World Meteorological Organization further revealed that El Niño conditions have formed in the tropical Pacific Ocean for the first time in seven years. This occurrence is expected to contribute to a further rise in temperatures across the globe.
Coinciding with these developments, the Food and Agriculture Organization of the United Nations released data indicating a sharp decline in the FAO Cereal Price Index. The index is expected to average 129.7 points in May 2023, which represents a 25.3% drop from last year’s record level. This decrease is primarily attributed to the significant decrease in world wheat and coarse grain prices, while rice prices remain higher than the same period last year.
Analysts from Minsheng Securities highlight that El Niño will have certain impacts on the main corn and soybean producing areas in China. However, they suggest that genetically modified corn and soybeans might indirectly alleviate production reduction pressures. Therefore, they advise investors to focus on leading corn seed companies.
Similarly, Essence Securities believes that El Niño’s direct impact is most evident in the agricultural production field. As a result, this weather phenomenon often leads to corresponding performances in agricultural-related commodity prices and secondary market stock prices. Within the agricultural sector, the feed and seed industries are expected to perform well.
The rise in stock prices within the agricultural planting sector reflects investors’ anticipation of potential challenges posed by El Niño and weather uncertainties. It is hoped that the implementation of detailed measures and targeted guidance will mitigate the impact and contribute to a successful harvest season.