[Special Stock] Daeyu, Food Fear Grows with Rising Grain Prices... Shift to Grains Following Semiconductors and Steel

[Asia Economy Reporter Hyungsoo Park] Daeyu, a fertilizer and pesticide manufacturer, is showing strong performance. Since the COVID-19 pandemic, global food prices for rice, wheat, barley, soybeans, and corn have steadily increased, which appears to be influencing stock prices as well.

As of 11:19 AM on the 3rd, Daeyu is trading at 15,000 KRW, up 6.38% from the previous trading day.

With Hyosung O&B surging, Daeyu is also showing a concurrent upward trend.

According to a recent announcement by the United Nations Food and Agriculture Organization (FAO), the global food price index for March rose 2.1% from the previous month to 118.5 points. The food price index has been rising for 10 consecutive months since June last year. In particular, the price index remains at its highest level since 2014.

While food prices are soaring, domestic self-sufficiency rates are declining every year. According to statistics from the Ministry of Agriculture, Food and Rural Affairs, South Korea's food self-sufficiency rate dropped from 54.2% in 1999 to 45.8% in 2019. Imports have increased significantly, making South Korea the world's 5th largest grain importer. More than half of the food we consume is imported.

Daeyu, established in 1977, is a fertilizer and pesticide manufacturer. It primarily operates in the foliar fertilization 4-component compound fertilizer market, which belongs to the special fertilizer segment within the overall fertilizer market.

Daeyu leads its business in this area. The foliar fertilization 4-component compound fertilizer market is characterized by competition among relatively small-scale companies compared to the general fertilizer market. Daeyu enjoys a competitive advantage based on its superior capital strength, as well as its sales network, technological capabilities, and brand recognition built over the past 40 years.

The fertilizer market is a mature industry, but the 4-component compound fertilizers that Daeyu focuses on have greater growth potential than the overall market. These 4-component compound fertilizers are multifunctional products mainly used not only for traditional crops but also for fruit trees and high-quality agricultural products. In line with the aging trend, Daeyu is promoting various types of fertilizers, including controlled-release fertilizers that significantly reduce labor requirements. Daeyu also plans to expand its pesticide business. It intends to enter Asian markets, including China, in the second half of this year.

Kim Sohyun, a researcher at Daishin Securities, explained, “Concerns about rising food prices are growing in some countries,” adding, “The average food price inflation rates from January to August last year in South Asia, Sub-Saharan Africa, and Latin America exceeded the global average food price inflation rate.”