(Yicai) Sept. 1 -- Stocks of some Chinese enterprises in the seed sector have experienced strong growth, as international prices of agricultural commodities rose because of the impact of geopolitical conflicts.

Corn hybrid seed producer Wanxiang Doneed [SHA: 600371] was trading up 10 percent at CNY13.96 (USD2.07) as of lunch break in Shanghai today, surging by the exchange-imposed limit for the sixth consecutive trading day. Cottonseed processing firm Sayram Modern Agriculture [SHA: 600540] soared 10 percent to CNY6.12 (91 US cents) as of 11.30 a.m. today, up by the limit for the fourth trading day in a row.

The Changjiang Securities Seed Industry Index rose about 24 percent in August.

Wheat and corn futures on the Chicago Mercantile Exchange both hit three-year highs in the last week of August, leading to a surge in international agricultural product prices. This was mainly because of a fundamental shift in global grain pricing dynamics.

The geopolitical conflict in the Black Sea has disrupted grain export routes, extreme weather associated with El Niño has heightened expectations of reduced global production, and recurring export bans imposed by some countries are the three main contributors to recent agricultural market volatility.

Rising grain prices primarily benefit the seed industry, with the bullish trend gradually spreading to fertilizers, pesticides, agricultural machinery, and the livestock industry chain, according to institutional analysts. However, the sustainability of the momentum still depends on actual expectations for production reduction.

The rally in seed stocks is driven not only by rising prices of some agricultural products, but also by pricing adjustments reflecting market expectations of systematic price increases in global agricultural products, Guotai Asset Management said.

Traders have indicated that the rise in Chinese seed stocks is more indicative of a premium related to food security and policy, rather than a direct reflection of current performance, Guotai Asset Management noted. After several days of gains, many stocks have diverged from their fundamentals, leading to substantial profit-taking pressure in the sector.

Compared with overseas disaster-hit areas, China has not faced widespread agricultural drought this year despite multiple overlapping climatic factors, and the overall fundamentals of autumn grain production remain positive, said Zheng Dawei, professor at the College of Resources and Environmental Sciences of China Agricultural University.

However, Zheng cautioned that the lagging effects of El Niño will likely extend for more than six months, and related agricultural risk factors may become more pronounced around 2027.

JPMorgan Chase warned that a global food crisis may erupt next year, while HSBC Holdings predicted global grain production will experience its first supply-demand imbalance since 2020-2021 in the 2026-2027 fiscal year. Citigroup raised its price targets for corn, wheat, and soybeans across the board.

Editor: Futura Costaglione