As grain prices rise due to Russia's invasion of Ukraine, feed and fertilizer stocks are showing strength.
As of 11:50 AM on the 22nd, Hanil Feed was trading at 3,630 KRW, up to the price limit of 29.87%. Hanil Feed also closed at the upper limit the previous day. Hyundai Feed also rose to the price limit of 31,550 KRW (29.84%) at the same time. Mirae Life Resources and Farm Story also increased by 17.04% and 8.35%, respectively.
The sharp rise in feed stocks is interpreted as a result of agflation (agricultural inflation: rapid increase in grain and agricultural product prices) caused by the Ukraine crisis. On the 21st (local time) at the Chicago Board of Trade (CBOT), May soybean futures were priced at 1,691 cents per bushel, an increase of 10.63% compared to early last month. May corn futures rose by 19.14%. The rise in grain prices led investors to expect feed companies to raise feed prices accordingly. Sanghoon Cho, a researcher at Shinhan Financial Investment, explained, "For feed companies engaged in B2B business, the time to actually set selling prices when grain prices rise is relatively shorter than that of general food processing companies," adding, "It seems that feed stocks surged due to expectations of price increases."
Fertilizer stocks are also showing strength amid the food crisis triggered by Russia. Hyosung O&Bi is trading at 17,150 KRW, up 14.33%. Additionally, Namhae Chemical and Jobi showed increases of 5.66% and 3.04%, respectively. The rise in grain prices leads to an expansion in agricultural production, which can increase demand for fertilizers to boost production volume, and this expectation is driving fertilizer stock prices higher. However, Dongchan Yeom, a researcher at Korea Investment & Securities, said, "In the case of fertilizer stocks, prices seem to be reflected faster than expected, so risk management appears necessary," adding, "If the stock price rose reflecting only demand improvement without including cost increase burdens, it could become a concern."
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