Why might agriculture be the next sector to see price increases?

Why does the agricultural index diverge from commodity price trends?

Recently, attentive investors may have noticed a phenomenon: since the outbreak of the Middle East conflict, agricultural futures (such as soybean meal and corn) have been on an upward trend, while the agricultural index in the stock market, which initially rose in tandem, has recently started to decline.

Figure: Trends of agricultural prices and the CSI Modern Agriculture Index since the outbreak of the Middle East conflict

Data source: Wind, using CME soybean meal and corn futures as representative agricultural price trends, with a time range from 2026/2/13 to 2026/3/20 (normalized for price changes)

The reason lies in the fact that the recent escalation of the Middle East conflict may last longer than expected. The protracted risk event has led to a rapid contraction in risk appetite in the stock market: investors prefer to reduce positions rather than trade potential benefits amidst uncertainty. While the industry is moving upwards, the stock market sentiment is risk-averse, which is the core reason for the misalignment between agricultural commodity prices and index trends.

However, this divergence between commodity and stock trends often breeds investment opportunities. When market sentiment is overly pessimistic and overlooks positive changes in the industrial fundamentals, it is precisely the starting point for contrarian thinking. Agriculture is likely to be the next rising commodity, and the current weakness in stock prices may be accumulating energy for future increases. Why do I say this? Because the logic driving agricultural price increases is transitioning from expectation to reality. Next, let’s break down these factors contributing to the price increase.

1. Price increase factor ①: Geopolitical conflicts and abnormal weather pushing up food prices

The most direct driver of agricultural price increases comes from costs and supply. Currently, both aspects are under significant impact.

Geopolitical conflicts push up farming costs: Oil is the source of fertilizers and fuel for agricultural machinery. The tense situation in the Middle East has led to high oil prices, which means that the costs for fertilizers and fuel for farming are soaring, directly raising the production costs of all food. When costs go up, there is a basis for food prices to rise.

Extreme weather causing supply shortages: Price increases cannot rely solely on cost drives; the real supply gap is more important. Last autumn, severe rainfall in North China led to a reduction in corn production and quality; continuous rainy weather has also delayed wheat planting and caused seedling losses, with expected production to decrease significantly. When stockpiles are consumed and new supply is insufficient, food prices are prone to rise and hard to fall.

Rising energy prices create new demand: In an era of high oil prices, the economics of biofuels (such as ethanol and biodiesel) become prominent. Corn, soybeans, and vegetable oils are not just food; they have also become raw materials for energy. This new industrial demand opens additional upward space for agricultural prices.

To summarize: geopolitical conflicts (which raise costs) + extreme weather (which reduces production) + energy alternatives (which increase demand), these three factors work together, putting food prices in a channel where they are easy to rise and hard to fall.

2. Price increase factor ②: Deep losses in livestock farming pave the way for future meat price increases

Some readers may ask: Why is the pig farming industry’s severe losses an investment opportunity? This is precisely the essence of cyclical investing: Cyclical investments are usually made when losses occur, not after prices rise, because stock prices may run ahead.

Deep losses are the starting point for price increases: Currently, pig prices have dropped to around 10 yuan/kg, with losses exceeding 200 yuan per pig, and even the most cost-efficient leaders are losing money. This sustained deep loss across the industry will force weaker and less efficient farmers to exit, reducing future pork supply.

The stock market trades on expectations: Historical experience shows that after 10-15 months of continuous losses in the pig farming industry, prices often usher in a trend upward. The stock market typically reflects this price increase expectation 8-10 months in advance. The industry has already experienced losses for nearly 6 months, indicating that the trading window for future meat price increases may be opening.

Rising feed prices accelerate exit: The rising prices of feed materials such as corn and soybean meal have further raised farming costs, accelerating the exit of loss-making capacities and strengthening expectations for future pork price increases.

To summarize: the losses observed in the livestock industry are preparing for future meat price increases. The stock market often trades ahead on the logic chain of “losses → capacity exit → future price increases.” Therefore, the industry’s darkest moment may be a golden window for stock market positioning.

In conclusion, agriculture may become the next rising commodity following energy. Although short-term index trends are negatively affected by risk preferences, in the medium to long term, with the industry emerging from a price increase trend, the value of stock assets is expected to be reassessed. For ordinary investors who are optimistic about the agricultural sector’s price increase but find it difficult to grasp specific segments, index investment is an efficient and convenient choice.

The representative index in the agricultural sector is the CSI Modern Agriculture Theme Index (930662.CSI), which aligns with the main line of agricultural price increases, including 50.1% in livestock (of which 43.4% is in pig farming and 6.7% is in broiler farming), 14% in planting, and 18% in feed, covering the three core tracks of pig farming, planting, and feed comprehensively.

The product tracking this index is Agricultural ETF E-Fund (562900), with the latest scale at 142 million yuan (2026-03-20), which can help investors capture the overall opportunities of the agricultural sector from cost-driven to cyclical reversal in a one-stop manner.