The surge in international agricultural prices is rapidly transmitting to the A-share market through expectation channels. On the final trading day of August, while the A-share seed industry sector maintained its strong momentum, internal divergence emerged: Wanxiang Denong (600371.SH) secured its fifth consecutive limit-up, Xinsai Shares (600540.SH) achieved a third consecutive limit-up, but Qiule Seed Industry (920087.BJ) plunged 6%, with the Changjiang Securities Seed Industry Index gaining roughly 24% in August.
A-share trends are closely linked to international commodity markets, as Chicago wheat and corn futures both hit three-year highs, with year-to-date gains exceeding 54% and 21% respectively. Behind this lies a fundamental shift in global grain pricing logic: the Black Sea geopolitical conflict blocking grain export routes, El Ni帽o extreme weather intensifying global production reduction expectations, and successive grain export bans across multiple countries. Amid these multiple disruptions, institutions have frequently issued food crisis warnings. JPMorgan has warned of a potential global food crisis next year, HSBC has cautioned that global grain production in the 2026-2027 period will experience the first supply-demand inversion since 2020-2021, and Citi has comprehensively raised price targets for corn, wheat, and soybeans.
Industry analysts believe that from an industrial chain transmission perspective, the seed industry benefits first, with the rally spreading toward fertilizers, pesticides, agricultural machinery, and aquaculture supply chains. However, the sustainability of this trend still awaits actual verification of production reduction expectations. In the short term, the seed sector has risen too sharply, with some stocks showing signs of high-volume stagnation, making overheating risks impossible to ignore.
Seed Industry Rally Driven by Expectation Gaming
Driven by Black Sea supply disruptions and extreme weather, international grain prices have climbed higher, with corn and wheat both rising to multi-year highs. On August 28 local time, Chicago wheat futures closed up 3.1% at 784 cents per bushel, touching an intraday high of 790.25 cents, marking the highest level since February 2023. Due to escalating geopolitical tensions, wheat futures have surged over 54.5% year-to-date. Corn has shown equally strong momentum, with Chicago corn futures closing up 0.6% at 536.5 cents per bushel, the highest since July 2023. Corn futures have accumulated a 15.6% gain in August alone; driven by tightening supply and robust demand, the commodity has risen 21.8% so far this year.
At the A-share level, the seed sector gained approximately 24% in August; the scale of ten grain-themed ETF products increased by 960 million yuan this year due to net subscription redemptions, with a net capital inflow of 437 million yuan in the past month. Guotai Fund believes that this round of sector performance is not merely speculative gaming driven by a single crop price increase, but rather a market repricing of expectations for systematic increases in global agricultural product prices. Trading sources noted that this indicates the A-share seed sector's rise reflects more of a food security premium and policy premium rather than current earnings delivery. After consecutive gains, many stocks' valuations have significantly diverged from their fundamentals, and the sector has accumulated considerable profit-taking pressure.
From a domestic industry fundamentals perspective, current high valuations are not well supported. Zheng Dawei, professor at the College of Resources and Environmental Sciences at China Agricultural University, analyzed that compared with overseas disaster-affected production areas, although 2026 saw multiple climate factors overlapping in China, no large-scale agricultural drought has occurred, and the overall fundamentals for the national autumn grain production remain positive. However, he cautioned that El Ni帽o's lagged effects typically persist for over six months, and related agricultural risk hazards could manifest intensively in 2027. Ping An Futures research reports also point out that El Ni帽o's impact on agricultural production reduction exhibits systematic lag, with substantive output shocks only becoming fully evident in the first half of 2027, although futures markets typically price in such expectations in advance. Climate predictions still contain variables, and El Ni帽o intensity remains uncertain, requiring continuous tracking of the National Climate Center's warning information.
The aforementioned trading sources further analyzed that short-term sentiment factors currently dominate capital positioning in the seed industry. Should the Black Sea situation ease, or should global agricultural supply exceed pessimistic market expectations, the sector would face phased adjustment pressure. From a medium-to-long-term perspective, only enterprises that truly master core breeding technologies and can fully capture the dividends of biological breeding industrialization will be able to convert policy premiums into tangible earnings growth.
"Weaponization of Food" Trend Heightens Market Concerns
As global grain prices climb further, the substantial increases in corn and wheat prices are underpinned by differing supply shock drivers. The core impetus behind corn price increases comes from continuously deteriorating U.S. supply expectations. The U.S. Department of Agriculture's August supply-demand report lowered the corn yield forecast to 180.7 bushels per acre; while the Pro Farmer annual crop tour's estimate was even more pessimistic at just 173.2 bushels per acre. Extreme July heat has already caused substantial damage to U.S. corn crops. Wheat price increases are primarily driven by escalating Black Sea geopolitical tensions. With Russia's grain export infrastructure damaged, the market has lowered export expectations by several million tons. Russia and Ukraine together account for approximately 30% of global wheat exports, making supply chain disruptions the core catalyst for wheat price increases. Oxford Economics estimates that disrupted port transportation in the Azov-Black Sea basin will reduce this year's global grain supply by approximately 86 million tons, accounting for about 17% of total global grain exports. Further escalation of Black Sea tensions could trigger even more violent global grain price fluctuations.
Extreme weather is further amplifying the intensity of supply shocks. In May 2026, an El Ni帽o event had already formed in the central-eastern equatorial Pacific, with multiple meteorological agencies judging this event could become the strongest El Ni帽o in 150 years. The International Grains Council predicts that global grain production in the 2026-2027 period will decline 2.7% year-on-year to 2.421 billion tons, with carryover stocks simultaneously decreasing by 26 million tons. On August 7, the United Nations World Food Programme (WFP) issued an early warning report stating that the persistently strengthening El Ni帽o will bring long-term cascading effects, and combined with lagged climate effects, global food insecurity risks will significantly rise in 2027.
The deeper transformation lies in the intensifying trend of "food weaponization." In recent years, trade protectionism in the global food sector has been on the rise, with multiple staple grain exporting countries successively implementing export quota tightening, tariff increases, and even temporary export bans to safeguard domestic supply and stabilize domestic food prices. Food is evolving from an ordinary commodity into a tool of geopolitical gaming. Maximo Torero, Chief Economist of the United Nations Food and Agriculture Organization, points out that drought itself does not necessarily cause famine; rather, trade blockades are the key factor amplifying crises. The current global grain inventory-to-consumption ratio stands at approximately 32%, and the total book balance is sufficient to cover global demand, but food accessibility remains the practical challenge. Global inventory distribution is uneven, and surplus stocks may not necessarily flow to low-income food-importing countries. Model calculations show that if a strong El Ni帽o coincides with multiple countries' export restrictions, the world could see an additional 21.4 million hungry people.
Global Food Crisis Fuels Inflation Pressures
The global food crisis is reshaping the transmission pathways of global inflation. JPMorgan's August report "Food Security as National Security: A Perfect Storm" attributes the drivers of this food crisis to "five W's": War, Weather, Warehousing, Water, and Waste. The report projects that global food inflation will rise from 2.8% in the first half of 2026 to 5% by the first half of 2027, with the core logic being the resonance formed by the "energy-fertilizer-food" triple transmission chain. Led by Nora Szentivanyi, the bank's senior global economist based in London, the report warns: "The next global inflation shock may not appear at the gas station, but on the supermarket food shelves."
More worthy of vigilance is the time lag created by layer-by-layer transmission. Commodity price increases typically take 3-6 months to transmit to terminal food consumer prices; while El Ni帽o's negative impact on agricultural production often lags 6-12 months behind peak ocean temperatures before becoming fully apparent. This means that from late 2026 to early 2027, terminal food prices could experience notable upward movement, while the 2027 spring-summer harvest season will be the critical window for the concentrated realization of climate-related production reduction effects.
Guotai Fund's analysis indicates that global inflation has shown systematic elevation since 2025, with commodities such as crude oil and industrial metals completing price revaluation first; however, agricultural products have experienced relatively lagged price transmission due to planting cycles and inventory buffers. As inventory buffers are gradually depleted, the inflationary impact of agricultural products is shifting from "lagged reaction" to "catch-up upward movement." Meanwhile, the global grain inventory safety cushion is thinning. The U.S. Department of Agriculture's (USDA) August supply-demand report projects that the inventory-to-consumption ratios for the world's four major staple grains (corn, soybeans, wheat, and rice) in the 2026-2027 period will all decline from the previous year, with the global corn inventory-to-consumption ratio already in a historically low range. The thinner the inventory safety cushion, the more efficiently supply disruptions transmit to market price adjustments. Once supply-demand fundamentals tighten further, grain prices could face systematic revaluation.