The Zhitong Finance App learned that Wanlian Securities released a research report saying that during the El Niño period, the volume and price performance of each variety was clearly differentiated. Whether production cuts could be transformed into a supply gap depended on production area concentration, inventory and policy. Market implementation lagged behind the peak of the incident. The high observation window for major varieties pointed to 3Q2027 to 1Q2028; on the company side, the benefit path and the pace of implementation are differentiated along the chain, and the three types of logic directly benefit, cost transmission and demand verification coexist. Maintaining the agricultural and animal husbandry industry's “better than the market” rating, the current sector's weather forecast pricing is sufficient. Subsequent excess earnings depend on the implementation of production cuts. It is recommended to focus on two main lines: 1) related industry chain companies that benefit from rising agricultural product prices; 2) seed companies that may increase demand for stress-resistant varieties under extreme weather, and agricultural companies with rigid export chains and demand.
The main views of Wanlian Securities are as follows:
Historical review shows that during the El Niño period, the volume and price performance of each variety was clearly differentiated. The actual impact depended on whether a supply gap could be formed, and overall market implementation lagged behind the peak of the incident
Reviewing the four incidents of 1982-1983, 1997-1998, 2014-2016, and 2023-2024, palm oil prices showed the strongest performance. In the last three comparable events, BMD palm oil rose 79.7%, 19.2%, and 16.4% respectively; rubber production fluctuated limited, and the market often started during or after the incident; from a historical perspective, high sugar prices occurred during or after the incident. 2014-2016 is about 11 months behind the peak of ONI, about 6 months behind the end of the event, 2023-2024 Basically in sync with the peak of ONI, the price direction depends on the net impact of production cuts in India and Thailand and the increase in production in Brazil, and needs to be assessed in the light of global supply and demand; cereal production rises and falls, with soybean prices mostly falling, while corn needs to be combined with consumption ratios, yield and policy analysis in major production areas. Overall, the concentration of production areas, inventory levels, and policy direction determine whether production cuts can form an actual supply gap. Under the same intensity, the range of increases for each variety is wide, and the weather intensity is insufficient to lock in the price range. This round of production shocks will unfold at the pace of cash out. The high market lags behind the peak of the incident, and the high observation window for major varieties points to the third quarter of 2027 to the first quarter of 2028.
On the company side, there is a clear differentiation between the benefit paths and the pace of implementation of companies in different industrial chains
In the natural rubber chain, the price of rubber rubber in Hainan overtook expectations of production cuts, and the fulfillment of profits depended on the production gap being realized. In the sugar and fat chain, COFCO Sugar's profits bucked the trend during the decline in sugar prices, and the expected energy storage cycle of production cuts reversed; Zanyu Technology benefited from palm oil cost dividends and lengthened the inventory revenue window after production cuts. In the soybean and corn chain, the amount of pressed arowana drove record profits, and soybean safety pads cushion upward cost disturbances; there is a potential gap in the biological cost transmission capacity of plum blossoms. In the seed industry chain, Longping Gocol Niño catalyzes resistance to stress and transgenic demand, and corn cycle pressure and high valuations limit elasticity; the “autonomous traits+autonomous varieties” card of the Denghai seed industry leads the way, and the demand for resistance to stress and genetically modified genes constitutes catalysis, but the 2026H1 leading order has not yet been verified. In the agrochemical chain, Runfeng Co., Ltd. was the first to benefit as a leading pesticide exporter. The rigidity of Xinyangfeng's demand for agricultural materials highlights defensive properties.
Investment advice
The review showed that the volume and price performance of each variety was clearly divided, and market fulfillment lagged behind the peak of the incident. On the variety side, the direction of palm oil is the most certain, followed by sugar, which still needs to be verified. The elasticity of corn comes from low inventories. Among them, palm oil production reduction and biodiesel diversion are expected to occur in the same direction; due to lower sugar production ratios in Brazil, hedging capacity in the southern hemisphere is weakened; corn stocks are thin, and US production area droughts and Panama Canal variables create supply doubts from both production and landing costs; rubber production fluctuates limited, but market space still requires continuous tracking of production area inventories and downstream demand. The bank maintains the agricultural and animal husbandry industry's “better than the market” rating. The current sector's weather forecast pricing is adequate. Subsequent excess earnings depend on the implementation of production cuts. It is recommended to focus on two main lines: 1) related industry chain companies that benefit from rising agricultural product prices; 2) seed companies that may increase demand for stress-resistant varieties under extreme weather, and agricultural companies with rigid export chains and demand.
Risk factors: risk that El Niño intensity and duration will fall short of expectations; risk of inventory and policy hedging; risk of downstream demand and transmission falling short of expectations.