Agriculture & Food

The recent severe drought in the two major grain exporting countries in the world, especially the drought that has occurred in Brazil once in a century, has had an important impact on the international agricultural product market. The continuous development of the drought and market speculation will promote the price increase of agricultural products.

On June 22, the concept of A-share agricultural products rose sharply. Among them, concept sectors such as corn, genetically modified, soybeans, etc. rose among the top.

As for individual stocks, as of the close, Shennong Technology soared by more than 13%, Dunhuang Seed's daily limit, Tsuen Yin Hi-Tech gained more than 6%, Fengle Seed, Suken Agricultural Development, Longping Hi-Tech, Nongfa Seed and other stocks rose in the top; In terms of other related stocks, Jiawo shares, Dahu shares, Pengdu Agriculture and Animal Husbandry, and Dayu Water Saving also recorded impressive gains.

This year, the "Impact of Disasters and Crises on Agriculture and Food Security" issued by the Food and Agriculture Organization of the United Nations pointed out that drought is the chief culprit in reducing agricultural production. Almost all the effects of drought are concentrated in agriculture, and the agricultural sector bears 82% of the effects of drought.

Severe drought will threaten grain production, affect the supply and demand relationship of agricultural product prices, and push up grain prices. Price fluctuations are the norm in the grain market, but violent fluctuations will affect the trend of the grain market, which in turn will affect food security.

Brazil has suffered a hundred years of drought! Corn soybean crisis

According to Wall Street news on June 22: Brazil’s Minister of Agriculture said that Brazil will suffer severe corn (planting) losses.

The forecast of the Brazilian authority National Commodity Supply Company (CONAB) shows that due to the drought, Brazil's 2020/2021 corn output is expected to shrink by 9.4% from 106.4 million tons to 96.39 million tons.

Brazil is the world's second largest corn exporter. In 2020, Brazil's corn exports were 38 million tons, accounting for 19.8% of total corn exports, making it the second largest grain exporter after the United States. Last year alone, national corn exports reached 6 billion U.S. dollars.

In addition, Brazil is the world's number one soybean exporter. Soybean trade accounts for 50% of the world. Since last year, Brazil has ranked first with 126 million tons of output and 84 million tons of exports.

Brazil, as the world’s fourth largest grain producer after China, the United States, and India, is experiencing the worst drought in 91 years while experiencing the epidemic. This not only threatens the growth of Brazilian crops, but also impacts the river transportation of agricultural products. Water shortages will push up prices of agricultural products worldwide and increase inflation.

Brazil’s Ministry of Mines and Energy said in a statement that “the current situation is severe” and that drought conditions will continue in the coming months, especially in the southeast and central and western regions.

What the market is worried about is that, as a "world's granary," Brazil's drought may cause drastic fluctuations in global agricultural prices if it continues.

U.S. soybeans and corn are rising in arid regions

According to a report from the World Wide Web on June 21, an extreme heat wave is currently approaching in the western and southern parts of the United States, causing a historic drought, and the probability of local fires has also risen sharply.

According to data from the Drought Monitoring Center of the United States, about 40% of the United States is currently experiencing drought conditions. In the western United States, about 88% of the areas are in drought. California, Arizona, Utah, and Nevada have more severe droughts than other western states. Some areas have reached the level of "abnormal drought". Agriculture, The animal husbandry industry is facing a great crisis.

The shortage of water resources caused by drought has caused a continuous impact on agricultural production in the west, affecting the growth of a series of crops, and the dry areas of soybeans and corn have increased.

At present, the emergence period of maize and the planting period of soybeans have higher water requirements. The duration and intensity of drought will have a significant impact on the planting schedule and later growth.

The National Weather Service recently issued high temperature warnings in California, Nevada, Utah, Arizona and Colorado. The highest temperature in some places is approaching 50 degrees Celsius. Analysis believes that the continued high temperature and drought not only caused a shortage of hydropower supplies in many states, but also affected crop yields and affected global food prices.