Straits of Hormuz situation disturbance, focus on agricultural cycle reversal opportunities

As of the close on March 12, the agriculture sector showed a volatile upward trend. The Agriculture Theme Index closed at 1,946.70 points, up 1.52% for the day. The sectors of grain planting and livestock farming performed actively. Yituo Shares (601038.SH) hit the daily limit, while Hainan Rubber (601118.SH), COFCO Technology (000930.SZ), Suken Agricultural Development (601952.SH), and Shennong Group (605296.SH) followed suit with gains. The E Fund Agriculture ETF (562900) was actively traded, closing up 2.03% with a turnover rate of 16.74%, making it a high-quality tool to seize the opportunities of the agricultural cycle reversal.

From the livestock side, hog production capacity is accelerating its clearance, signaling a window for strategic positioning. As of March 11, the national average hog price approached 5 yuan per jin, and the main futures contract for hogs closed at 11,170 yuan per ton, both operating at low levels. Coupled with rising feed costs, the industry’s average loss per head exceeds 300 yuan. The ongoing cash flow pressure is accelerating market-driven capacity clearance, and the reversal expectations in the livestock sector continue to heat up.

On the planting side, grain and oil prices are highly correlated and are currently facing significant supply shocks. Rising oil prices directly increase the costs of fertilizers and agricultural machinery, driving grain prices higher. More importantly, the ongoing tensions in the Strait of Hormuz, a vital route for global fertilizer trade, could lead to a blockade that cuts off one-third of the world’s urea exports. Additionally, major urea-exporting countries like Iran are facing factory shutdowns and shipment delays, which could severely impact global grain output. Currently, the global grain inventory-to-consumption ratio has fallen to a cycle-low of 23.8%, indicating a fragile supply chain and significant upward pressure on grain prices.

Overall, with capacity in livestock accelerating its clearance and supply in planting constrained, the agricultural sector is on the verge of a cyclical reversal, highlighting its investment value. To capitalize on this cycle, focus on the E Fund Agriculture ETF (562900), which precisely aligns with the rising trend in agriculture prices. Its holdings are comprehensive, with 50.1% invested in livestock (including 43.4% in hog farming and 6.7% in poultry farming), 14% in planting, and 18% in feed. Covering the three core sectors of hog, planting, and feed, it can fully benefit from the dual dividends of livestock sector reversal and grain price increases, making it an efficient investment tool to seize this agricultural cycle turnaround.