[Asia Economy Reporter Kwon Jaehee] Amid rising inflationary pressures recently, 'agflation' is being identified as a key variable that can curb inflation. Agflation is a portmanteau of Agriculture and Inflation, referring to the phenomenon where soaring food prices push up overall inflation. Although related stocks such as grains, feed, and fertilizers have already surged once, there is growing consensus that agflation will continue for some time.
According to the Chicago Board of Trade (CBOT) on the 3rd, wheat futures prices recorded 1,058.25 cents per bushel (27.2kg), up 1.63% from the previous day. Wheat, which traded around 615 cents last July, has been fluctuating above 1,000 cents since the Russia-Ukraine war began. International corn futures prices also rose about 30-40% compared to a year ago, reaching 730.25 cents per bushel from around 500 cents.
Although concerns about agflation first emerged due to the Russia-Ukraine war, worries are growing as this situation is expected to persist for the time being. Ukraine, known as the world's granary, is entering the harvest season for major crops such as wheat and sunflower by the end of June, but Russia's blockade of ports has trapped 22 million tons of food supplies. It is expected that less than half of the harvest will be exportable, leading to a forecast of an 8% decrease in global grain exports.
As a result, not only feed and fertilizer stocks but also food stocks that use grains as raw materials are expected to continue their strong performance for the time being. For example, Hyundai Feed has risen for six consecutive trading days and was trading at 156,600 KRW as of 9:20 a.m. on the day, up 1.62% from the previous trading day. After reaching a peak of 174,000 KRW on April 20, it fluctuated around the 130,000 KRW level before returning to an upward trend. Hite Jinro, a representative food and beverage stock using grains as raw materials, is also considered a beneficiary. Hite Jinro rebounded after hitting a low of 27,800 KRW on January 28 and is currently fluctuating around the 35,000 KRW level.
Researcher Cho Sanghoon of Shinhan Financial Investment stated, "International grain prices are expected to remain strong until the third quarter of this year," adding, "Concerns about rising cost ratios have already been reflected in stock prices, and despite the strong grain prices, it is possible to devise investment strategies focusing on stocks with high pricing power and those that can benefit from reopening."
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