Rising Agricultural Product Prices Boost Expectations for Agricultural Product Funds ↑

Rising Agricultural Product Prices Amid Falling Raw Material Costs

[Asia Economy Reporter Song Hwajeong] As concerns over the occurrence of La Ni?a have recently caused agricultural product prices to rise, expectations for the returns of agricultural product funds are also increasing.

According to Daishin Securities on the 8th, the commodity index (S&P GSCI) in the first week of September fell by 3.6% compared to the previous week. Within the commodity market, energy, precious metals, and industrial metals showed the largest negative declines in that order, while only agricultural products recorded positive returns. The S&P GSCI agricultural products index rose 0.1% from the previous week to 321.8. Among agricultural products, cocoa, coffee, and soybeans ranked high in returns within the commodity sector.

This rise in commodity prices is analyzed to be due to the increased possibility of La Ni?a in the second half of the year and the growing demand for agricultural products in China. Kim Sohyun, a researcher at Daishin Securities, explained, "Concerns about crop damage are increasing due to hot and dry weather in the Corn Belt (the world's top corn-growing region spanning the U.S. Midwest). The rising possibility of La Ni?a in the second half of the year is raising concerns about drought damage in major grain-exporting countries such as the U.S., Brazil, and Argentina." Recently, climate research institutes in the U.S. and Australia have raised their forecasts for the likelihood of La Ni?a this year. The U.S. National Oceanic and Atmospheric Administration (NOAA) and the Australian Bureau of Meteorology forecast the probability of La Ni?a occurrence by the end of this year at 60% and 70%, respectively.

China's recent increase in grain imports has also contributed to the rise in agricultural product prices. According to the Chinese Customs Administration, China's grain imports in July increased by 62% compared to the same month last year.

Due to the rise in agricultural product prices and other factors, funds have recently flowed into agricultural product funds, pushing net assets beyond 90 billion KRW. According to financial information provider FnGuide, the net assets of nine agricultural product funds with assets under management of over 1 billion KRW reached 90.1 billion KRW as of the 4th. In the past month alone, 23.3 billion KRW was inflowed, surpassing 90 billion KRW.

The returns are also at a favorable level. The recent three-month return of agricultural product funds reached 8.9%.

The future trend is expected to be monitored as agricultural product prices may be affected depending on the progress of the U.S.-China trade negotiations. Choi Jinyoung, a researcher at Ebest Investment & Securities, said, "The recent price increase should be seen as a result of the implementation of the U.S.-China trade agreement. China's implementation rate in the agricultural product sector is 79%, which is sufficiently encouraging given that the U.S. corn and soybean harvest season is approaching." He added, "La Ni?a that may occur in the future could also additionally affect prices." Researcher Kim predicted, "Until the U.S. presidential election, depending on whether conflicts between the U.S. and China intensify, China's willingness to negotiate trade may change, so there is a high possibility that the rise in agricultural product prices will be limited."

This content was produced with the assistance of AI translation services.