# Public Funds "Rush to Plant"! Why Have Agricultural Product Tracks Suddenly Become "Red-Hot"?

Financial Daily Reporter: Li Na Financial Daily Editor: Peng Shuiping

After oil, gas, and chemicals, the agricultural products sector suddenly becomes lively. Since March, many fund companies such as Huaxia, Guotai, CCB Trust, Taikang, Bosera, Ping An, and others have consecutively filed applications for related new products. Products under Huishan and Invesco Great Wall have also been established one after another. From livestock to grains, this comprehensive layout by funds is driven by multiple resonating factors such as geopolitical conflicts and cyclical lows.

Funds Rush into the Agricultural Products Sector

Since March, public funds have launched a wave of strategic positioning in agricultural-themed ETFs. From product filings to issuance and establishment, all stages are accelerating, with several leading institutions competing simultaneously.

According to the official website of the China Securities Regulatory Commission, fund companies’ increased focus on the agricultural sector is expanding from livestock to a broader grain industry. On March 11, Taikang Fund applied for the Taikang China Securities Grain Industry ETF; Bosera Fund also applied for the Bosera China Securities Grain Industry ETF. Both products were filed on the same day, expanding their scope to the grain sector. On March 13, Huaxia Fund and Guotai Fund also applied for corresponding China Securities Grain Industry ETFs. On the same day, HuaAn Fund filed a fund tracking the CSI Agricultural Theme Index.

On March 12, Ping An Fund applied for the Ping An China Securities Livestock and Breeding ETF Initiating Link Fund, further enriching its livestock industry chain product lineup. From livestock to grains, fund companies’ layouts are gradually unfolding, covering multiple key links in the agricultural product industry chain.

The issuance and establishment phase is equally lively. On March 11, Huishan Zhongzheng Livestock and Breeding Industry ETF was established, raising 426 million yuan with 5,442 valid subscriptions; on the same day, Invesco Great Wall Agriculture, Forestry, and Fishery ETF announced its establishment, raising 781 million yuan with 13,534 valid subscriptions.

This week, three agricultural-themed funds competed simultaneously: Huatai-PineBridge China Securities Livestock and Breeding Industry ETF, which was launched from March 13 to March 26; Southern China Securities All-Index Agriculture, Forestry, and Fishery ETF, issued from March 9 to March 20; and GF China Securities Livestock and Breeding Industry ETF, also launched on March 9.

Multiple Logical Resonances in the Agricultural Sector

Several research analysts interviewed believe that the current dense deployment of agricultural-themed ETFs by fund companies is driven by multiple factors resonating together. The escalation of geopolitical conflicts pushing up crude oil prices, the bottom of the breeding cycle accelerating capacity reduction, and other factors collectively form the core logic behind institutional optimism for the agricultural sector.

Jianghai Securities analyst Zhang Jing believes that the escalation of US-Iran conflicts has led to a sharp rise in oil prices, driving up agricultural product prices.

In her view, the impact of oil prices on agricultural products mainly manifests in three aspects: First, substitution demand. Since 2014, over 40% of ethanol in the US has been used for fuel ethanol production, and Brazil’s gasoline-ethanol blending ratio has reached 30%. Rising oil prices directly boost demand for fuel ethanol and related fats, thereby raising prices of crops like corn and sugarcane; second, increased agricultural input costs. Iran is a major exporter of methanol and urea globally. Instability in Iran stimulates prices of nitrogen fertilizers, potash, and glyphosate, and higher input costs are transmitted to agricultural product prices; third, increased logistics and transportation costs. Blockages in shipping through the Strait of Hormuz raise logistics costs and also push up product prices.

Meanwhile, the cyclical bottom of the livestock industry chain also provides a safety margin for institutional deployment. The Jiangsu Securities Agriculture, Forestry, Animal Husbandry, and Fishery Research Team pointed out that recent pig prices have remained low, with the industry suffering losses for over five months. Market-driven clearing of breeding capacity may officially begin. The reduction of breeding capacity is a continuous process; high-cost breeders will be the first to exit. During the downturn, cost competitiveness will become the core advantage for enterprises. This cycle may lead to ongoing optimization of the competitive landscape in the breeding industry, with companies that have cost advantages and sufficient cash flow likely to enjoy longer profit cycles.

Additionally, ongoing geopolitical issues continue to ferment. On one hand, sustained high oil prices increase planting costs in major agricultural regions such as the US, Brazil, and Europe. On the other hand, if the Strait of Hormuz experiences continuous shipping disruptions, it will not only affect crude oil supply but also disrupt grain trade routes, especially impacting grain imports in the Middle East and Asia. Under the combined effects of planting cost transmission and supply chain risks, prices of major agricultural commodities like soybeans, corn, and wheat may rise.

Bosera Oil & Gas ETF fund manager Wang Xiang told the Daily Economic News that rising oil prices increase costs for fertilizers, pesticides, fuels, and transportation, thereby raising planting and landed costs. Historically, there have been three instances since 2000 where oil prices and agricultural products moved in tandem, with correlations between corn, fats, beans, and crude oil exceeding 75%. Therefore, this round of rising oil prices is expected to improve profitability at the planting end and transmit upstream to seeds and land resources along the industry chain. Coupled with the advancement of biological breeding industrialization, the grain sector is likely to see a “valuation + performance” resonance.

Daily Economic News