Rising prices of agricultural products and declining indices—where are the opportunities in the agricultural sector?

Against the backdrop of an energy crisis, agricultural commodity futures have continued to strengthen, while the CSI Modern Agriculture Index has seen interim pullbacks. There has been a divergence between commodity and stock market trends. The core reason lies in falling risk appetite in the market and risk-averse sentiment taking the lead. In the short term, signals of improving fundamentals in the sector have been somewhat muted, and the window for a left-side positioning has already begun to appear.

The price-increase-driven logic for the agriculture sector is clear and has strong resonance:

On the one hand, international oil prices have been trading at high levels, pushing up planting costs in a relatively rigid manner, including those for fertilizer and agricultural machinery fuel. Extreme weather affects crop production, while inventory depletion and supply shortages occur. At the same time, demand for biofuels is rising. Commodities such as corn and soybeans have both food and energy attributes, and industrial demand is opening up additional room for price increases. With multiple factors working together, grain prices are more likely to rise than to fall.

On the other hand, the hog-raising industry has reached the bottom of its cycle. It has been deeply loss-making for nearly 6 months, with a per-head loss of over 200 yuan. Industry capacity continues to clear; inefficient breeders accelerate their exit, and pork supply will keep declining. Judging from historical patterns, after an industry has sustained losses for 10–15 months, it will enter a trend of rising prices. The stock market typically reflects expectations 8–10 months in advance. The current layout window for the hog cycle has already opened. Meanwhile, rising prices of feed raw materials will further reinforce expectations of hog prices moving higher.

Index-based tools are an efficient and convenient way to cover the main agricultural theme. The representative index in the agriculture space at present is the CSI Modern Agriculture Thematic Index. This index comprehensively covers three major core tracks: hog breeding, the planting industry, and feed, with a combined weighting of more than 75%, which closely aligns with the agricultural price-increase main storyline. The E Fund Agriculture ETF (562900) tracks this index, and its management fee rate is only 0.15% per year—the lowest tier among ETFs—helping investors capture overall opportunities in the agriculture sector in one stop.

Risk warning: Funds involve risk; invest prudently.

Source: ETF Flash