Chinese A-shares have recently awakened their inner "farming gene," with agriculture-themed investments emerging as a major focal point. For a long time, the market's spotlight seemed locked exclusively on tech and AI-related assets. Now, however, the spotlight has shifted to grains and seeds, sectors that lack the glamour of "stars and seas."
The catalyst stems from the most discussed story of the past summer: El Nino. To recap this familiar yet often misunderstood high-school geography term, El Nino is an abnormal warming of seawater in the equatorial Pacific that disrupts global atmospheric circulation, leading to extreme droughts or floods. For agriculture, its transmission chain is straightforward—extreme weather disrupts normal planting schedules, reduces harvests in major producing regions, and drives up grain prices accordingly.
Now that early autumn has arrived, El Nino's impact is becoming visible in the data. Corn quality ratings in the United States have declined notably year-on-year, and the FAO Food Price Index reversed its decline in July, with wheat prices up 5.8% month-on-month and corn up 3.6%. This is the logic that has been repeatedly validated throughout the current agricultural rally.
However, the complexity of this cycle should not be underestimated. The forces behind it extend far beyond weather patterns.
An Overlooked Transmission: How Energy Redefines Food Pricing
Beyond weather, energy is reshaping agricultural product prices. Due to widely known reasons, Brent crude oil prices have shifted higher this year. As oil prices climb, the economics of biodiesel become more attractive. When large quantities of soybeans are diverted for oil refining and fuel production, it inevitably squeezes a portion of the edible supply. Sugarcane serves as a prime example: Brazil has redirected more of its crop toward ethanol production this year, intensifying global sugar supply contraction expectations. Combined with El Nino and reduced output in Thailand, international sugar prices (ICE No. 11 raw sugar futures) surged 21.5% in August, marking the largest monthly gain since October 2010.
This "crowding-out effect" has a parallel in the AI supply chain: electronic fabric manufacturers allocate some capacity to produce high-end fabrics for AI applications, causing passive contraction in ordinary electronic fabric supply and significant price hikes. Different supply chains, yet the underlying resource allocation logic is identical.
Drilling down one more layer, the act of farming itself has also become more expensive due to higher energy costs. Fertilizers use natural gas as a primary raw material, pesticide production relies heavily on petrochemical inputs, and machinery fuel and shipping costs—nearly the entire cost structure of agriculture—are deeply tied to energy prices. Energy price increases are not isolated disruptions but systematically elevate the entire cost base of agricultural production.
Stacking these layers of logic leads to a single conclusion: as fossil fuel prices rise, the output value of land must also be repriced upward. This is the energy narrative behind the current agricultural rally.
Shifting from Narrative to Reality
A pertinent question emerges: why have some funds chosen this moment to rotate from technology into agriculture? The answer lies in the differing pricing logic of these two asset classes. Tech assets are primarily driven by long-term narratives—how far AI computing expansion will reach, when the application layer will explode, what profit potential looks like three years out. Valuation expansion for these assets often outruns earnings validation, relying heavily on market expectations for future industry prospects.
When the marginal validation of narratives fails to keep pace with valuation expansion, capital tends to seek more certain, tangible anchors. Commodities and physical assets, while also trading forward supply-demand expectations, anchor their pricing more closely to observable real-world supply-demand signals, focusing on whether price increases can translate into actual corporate earnings. The supply shocks from El Nino and rising energy prices provide a clear repricing opportunity for these assets.
However, such rotation typically involves timing mismatches. On one hand, transmission from energy to agricultural products often lags—crude oil prices rose early this year, while agricultural products, constrained by inventory buffers and planting cycles, responded noticeably slower. On the other hand, grain stock prices may lead the spot market. Stock markets trade expectations, potentially pricing in price increases before substantial spot price gains materialize.
This also implies that while the grains sector has already shown prosperity, it does not necessarily mean spot price increases have fully materialized. Combined with the ongoing evolution of El Nino and renewed geopolitical uncertainty, the current moment may still represent a worthwhile window for positioning.
Not a Broad Rally: Who Is Truly Delivering
It should be noted that this agricultural rally is not uniform across the board. Looking at the industry chain, the segments seeing the most concentrated gains are: planting, seed production, and agricultural chemicals/fertilizers.
The logic for planting and seed production is relatively straightforward—as grain prices rise, farming income follows, and seeds, being the most upstream link in the planting process, directly benefit, especially with the added policy impetus of commercialized genetically modified crop promotion.
Meanwhile, agricultural chemicals are poised for synchronized upward momentum. Historical patterns show that when grain prices enter an upward cycle, farmers' willingness to plant increases, per-unit-area input rises, and demand elasticity for fertilizers and pesticides expands accordingly. This resembles the "selling shovels" logic.
The supply side also offers support. For potash, major producing regions such as Russia, Belarus, and Canada face constraints from geopolitical factors and maintenance shutdowns, with new capacity ramping up slowly, providing medium-term support for industry prosperity. For phosphate fertilizers, domestic phosphate rock supply remains tight with limited high-grade resources, meaning integrated leaders with upstream resource access can more easily sustain stable profitability even with high raw material costs. The dual logic of "mandatory planting demand" plus "price increases" is further amplified.
In pesticides, export tax rebate adjustments combined with industry "anti-involution" trends have raised export costs for low-value-added products, accelerating the exit of price-competition-dependent enterprises. Meanwhile, global channel inventories have fallen back to healthy levels, overseas restocking demand is gradually emerging, and both formulation exports and leader profitability show signs of recovery. Should El Nino further elevate the probability of global pest and disease outbreaks, the demand elasticity for pesticides could exceed expectations.
Returning to the investment tools themselves, the Grain ETF Guotai (159033), tracking the Guozheng Grain Industry Index (399365), shows that seed, planting, fertilizer, and pesticide-related segments collectively account for over 75% of the index weight based on industry distribution. This precisely covers the core segments benefitting most directly from the current rally, rather than offering a generic agriculture concept. Data source: Wind, as of September 9, 2026. Index industry weights are dynamically adjusted and for reference only; they do not represent future performance and do not constitute investment advice or stock recommendations.
Standing in the field is not difficult, but one must clearly see who is truly reaping the harvest. The Grain ETF Guotai (159033) and its feeder funds serve as one tool option for participating in the main thread of this rally. However, it is worth noting that after accumulating certain gains in the early stage, the sector is currently experiencing volatility and pullbacks. Additionally, weather variables carry the possibility of being disproven, and the energy transmission chain remains susceptible to geopolitical influences. With multiple complex factors at play, continued monitoring and rational decision-making are essential.
Grain ETF Guotai 159033 Feeder A 028824, Feeder C 028825
Note: The Grain ETF Guotai has an annual management fee of 0.50% and an annual custody fee of 0.10%. Front-end subscription rates for this fund are as follows: 0.30% for amounts below 500,000 yuan; 0.20% for amounts from 500,000 yuan (inclusive) to below 1,000,000 yuan; and a flat fee of 100 yuan per transaction for amounts of 1,000,000 yuan (inclusive) or above. Feeder fund rates are as follows:
Risk Disclosure: The views expressed are for reference only and may change with market conditions; they do not constitute investment advice or commitments. Funds carry risks; investors should invest cautiously. Historical index performance does not guarantee future results and does not constitute investment advice or commitments. The aforementioned ETFs are equity funds, with expected returns and risk levels higher than hybrid funds, bond funds, and money market funds. These ETFs are index funds tracking a designated index, and their risk-return characteristics are similar to the market portfolio represented by the index. The aforementioned feeder funds target equity index ETFs, with expected returns and risk levels theoretically higher than hybrid funds, bond funds, and money market funds. The funds primarily track the index performance by investing in the target ETF, exhibiting risk-return characteristics similar to the index and the securities market it represents. Investors should carefully read the Fund Contract, Prospectus, Product Summary, Risk Disclosure Statement, and other legal documents before investing, understand the risk-return characteristics of the fund, and judge whether the fund suits their risk tolerance based on their investment objectives, horizon, experience, and financial condition. Funds carry risks; investment requires caution.
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