The dramatic increase in international agricultural product prices is rapidly transmitting to A-shares through expectation channels. On the final trading day of August, the A-share seed industry sector maintained its strength but showed internal divergence: Wanxiang Denong (600371.SH) achieved a fifth consecutive limit-up, Xinsai Shares (600540.SH) saw a third, while Qiule Seed Industry (920087.BJ) plunged 6%. The Changjiang Securities Seed Industry Index rose approximately 24% in August.

A-share trends are closely linked to international commodity movements, with Chicago wheat and corn futures both hitting three-year highs, posting year-to-date gains of over 54% and 21%, respectively. This surge is underpinned by a fundamental shift in global food pricing logic, driven by Black Sea geopolitical conflicts blocking grain export routes, El Ni帽o extreme weather intensifying global production cut expectations, and a series of grain export bans announced by multiple countries.

Amid these multiple disruptions, institutions are frequently issuing food crisis warnings. JPMorgan has warned of a potential global food crisis next year, HSBC cautions that global grain production in 2026-2027 will see its first supply-demand deficit since 2020-2021, and Citi has comprehensively raised price targets for corn, wheat, and soybeans.

Industry analysts suggest that from an industry chain transmission perspective, the seed industry benefits first, with the momentum spreading to fertilizers, pesticides, agricultural machinery, and aquaculture sectors. However, the sustainability of this trend still awaits validation from actual production reduction expectations. In the short term, the seed sector has seen excessive gains, with some stocks showing signs of volume expansion without price increase, indicating overheating risks that cannot be ignored.

Seed Industry Rally Driven by Expectation Games

Driven by Black Sea supply disruptions and extreme weather, international grain prices have risen, with corn and wheat prices both climbing to multi-year highs. On August 28, 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 similar strength. Chicago corn futures rose 0.6% to close at 536.5 cents per bushel, the highest since July 2023. Since August, corn futures have accumulated a gain of 15.6%; driven by tightening supply and robust demand, the commodity has climbed 21.8% so far this year.

At the A-share level, the seed industry sector has gained about 24% in August; 10 grain-themed ETFs saw a net asset increase of 960 million yuan from subscription and redemption flows this year, with net inflows of 437 million yuan in the past month.

Guotai Fund believes the sector's recent rally is not merely a speculative play driven by a single crop price surge, but rather a market correction of pricing for expectations of a systemic rise in global agricultural product prices. Traders told reporters that this implies the A-share seed sector's rise reflects a food security premium and policy premium, not current earnings realization. After consecutive gains, valuations of several stocks have significantly deviated from fundamentals, and the sector has accumulated considerable profit-taking pressure.

From the perspective of domestic industry fundamentals, they do not support the sector's current high valuations. Zheng Dawei, a professor at China Agricultural University's College of Resources and Environmental Sciences, analyzed that compared to overseas disaster-affected production areas, although China encountered multiple overlapping climate factors in 2026, there has been no widespread agricultural drought, and the national autumn grain production fundamentals are generally improving. However, he cautioned that the lagged effects of El Ni帽o typically persist for more than six months, and related agricultural risk hazards may become concentrated in 2027.

Ping An Futures research reports also point out that El Ni帽o's impact on agricultural production reduction is systematically lagged, with substantial output shocks often not fully reflected until the first half of 2027. However, futures markets typically price in such expectations in advance. Climate predictions currently remain variable, and the intensity of El Ni帽o is still uncertain, requiring continuous monitoring of National Climate Center warnings.

The traders further analyzed that current capital positioning in the seed industry is dominated by short-term sentiment. Should the Black Sea situation ease, or if global agricultural supply proves less pessimistic than market expectations, the sector faces phased adjustment pressure. Over the medium to long term, only companies that truly master core breeding technologies and can fully capitalize on the industrialization benefits of biological breeding are expected to convert policy premiums into tangible earnings growth.

Rising 'Food Weaponization' Trend Heightens Market Concerns

The further escalation of global food prices, with substantial increases in corn and wheat prices, stems from different supply-side drivers. The core impetus for corn price increases comes from the continuous deterioration of US supply expectations. The USDA's August supply-demand report lowered the corn yield forecast to 180.7 bushels per acre; the Pro Farmer annual crop tour provided an even more pessimistic estimate of only 173.2 bushels per acre. Extreme high temperatures in July have already caused substantial damage to US corn crops.

Wheat price increases are primarily driven by escalating Black Sea geopolitical tensions. Damage to Russian grain export infrastructure has led the market to lower export expectations by millions of 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 disruptions to port transport in the Azov-Black Sea basin will reduce global grain supply by approximately 86 million tons this year, accounting for about 17% of global grain exports. Further escalation of the Black Sea situation could trigger even more violent fluctuations in global grain prices.

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 several meteorological agencies judging it could become the strongest El Ni帽o in 150 years. The International Grains Council predicts that global grain production in 2026-2027 will decline by 2.7% year-on-year to 2.421 billion tons, with carryover stocks decreasing by 26 million tons simultaneously.

On August 7, the United Nations World Food Programme (WFP) issued a warning report stating that the continuously strengthening El Ni帽o will bring long-term chain effects. Combined with the lag in climate effects, global food insecurity risks will significantly rise in 2027. A deeper underlying change is the increasing trend of "food weaponization."

In recent years, trade protectionism in the global food sector has been on the rise. Several major grain-exporting countries have successively implemented measures such as tightening export quotas, raising tariffs, and even imposing temporary export bans to safeguard domestic supply and stabilize domestic food prices. Food is evolving from an ordinary commodity into a tool of geopolitical maneuvering.

Maximo Torero, Chief Economist of the UN Food and Agriculture Organization, pointed out that drought itself does not necessarily lead to famine; trade blockades are the key factor amplifying crises. Currently, the global grain inventory-to-consumption ratio is around 32%, and the book total is sufficient to cover global demand, but food availability is the practical challenge. Global inventory distribution is uneven, and surplus stocks may not necessarily flow to low-income grain-importing countries. Model calculations show that a strong El Ni帽o combined with export restrictions from multiple countries could add 21.4 million hungry people globally.

Food Crisis to Fuel Global Inflation

The global food crisis is reshaping the transmission pathways of global inflation. In August, JPMorgan released a report titled "Food Security as National Security: A Compound Storm," attributing the drivers of this food crisis to "five Ws": 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% in the first half of 2027, with the core logic being the resonance formed by the "energy-fertilizer-food" triple transmission chain.

The report, led by Nora Szentivanyi, a senior global economist at JPMorgan in London, warns: "The next global inflation shock may not appear at the gas pump, but on supermarket food shelves." Equally concerning is the time lag created by the multi-layered transmission. The pass-through of commodity price increases to terminal food consumer prices typically lags by 3-6 months; the negative impact of El Ni帽o on agricultural production tends to fully manifest 6-12 months after the peak of ocean temperatures.

This means that between the end of 2026 and the beginning of 2027, terminal food prices could see a marked uptick, and the spring-summer harvest season of 2027 will be the critical window for the concentrated realization of climate-related production reduction effects. Guotai Fund analysis indicates that global inflation has systematically risen since 2025, with commodities such as crude oil and industrial metals completing price revaluation first. However, due to planting cycles and inventory buffers, agricultural product price transmission has been relatively lagged. As inventory buffers are gradually consumed, the inflationary impact of agricultural products is shifting from a "lagging reaction" to a "catch-up upward" trend.

Meanwhile, the global food inventory safety cushion is thinning. The US Department of Agriculture's (USDA) August supply-demand report estimates that in the 2026 and 2027 marketing years, the global inventory-to-consumption ratios for the four major staple grains - corn, soybeans, wheat, and rice - will all decline compared to the previous year, with the global corn ratio already at historically low levels. The thinner the inventory safety cushion, the more efficiently supply disruptions transmit to market prices. Should supply-demand fundamentals tighten further, food prices could face a systemic revaluation.