Fund companies "rush to launch" agricultural product-themed ETFs

□Our Reporter Zhang Lingzhi

Recently, fund companies have launched a wave of layout in the agricultural product-themed ETF sector. Huaxia Fund, Guotai Fund, Taikang Fund, Bosera Fund, and others have submitted applications for the China Securities Grain Industry ETF, while Ping An Fund, East Money Fund, E Fund, and others are focusing on the livestock breeding track. Since the beginning of the year, 13 ETFs and index funds related to livestock breeding have been filed.

At the same time, several products such as the Harvest Fund CSI Livestock Breeding Industry ETF and Invesco Great Wall Agriculture, Fishery, and Livestock ETF have been established with considerable fundraising scales.

The intense layout is driven by multiple logical resonances: fund companies are stepping out of popular tracks of “involution” and turning to differentiated deep cultivation in segments like grains, agriculture, and fisheries; geopolitical conflicts are pushing up oil prices, which are transmitted to agricultural product prices through multiple channels; the breeding industry chain is at the bottom of the cycle, with accelerated capacity reduction creating a window for early positioning. However, amid the hot trend, institutions also warn of risks, such as uncertainties in oil price movements and the possibility that pig capacity reduction may fall short of expectations. Investors should view these developments rationally.

Intensive Reporting of Agricultural Product-Themed ETFs

Recently, fund companies have been actively filing for ETFs focused on grains, livestock, and fisheries. According to the China Securities Regulatory Commission website, on March 13, Huaxia Fund and Guotai Fund both applied for the China Securities Grain Industry ETF; on March 11, Taikang Fund and Bosera Fund also filed similar products.

Applications for livestock breeding-related ETFs and index funds are also booming. On March 12, Ping An Fund applied for the Ping An CSI Livestock Breeding ETF Launch-Linked Fund; on March 11, East Money Fund filed for the CSI Livestock Breeding Industry Index Fund. Since the beginning of the year, 13 ETFs and index funds related to livestock breeding have been filed.

On the issuance side, multiple livestock, agriculture, and fishery-related ETFs have attracted capital. On March 11, the Harvest CSI Livestock Breeding Industry ETF was established with a fundraising scale of 426 million yuan; on the same day, Invesco Great Wall Agriculture, Fishery, and Livestock ETF announced its establishment with a scale of 781 million yuan. Recently, three more agricultural product-themed funds have launched sales: Huatai-PineBridge CSI Livestock Breeding Industry ETF, Southern CSI All-Index Agriculture, Fishery, and Livestock ETF, and GF CSI Livestock Breeding Industry ETF.

Reasons for Layout Are Diverse

The intensive layout of grain, livestock, and fishery ETFs by fund companies is partly driven by differentiation considerations. Yu Li, head of quantitative investment at Xinyuan Fund, said that unlike last year’s focus on popular tracks, this year’s ETF layout has three changes: expanding in breadth to less popular sectors like food, grains, and agriculture & fisheries; deepening in specific industries; and focusing more on investment themes with higher individual stock weight limits.

On the other hand, this round of fund companies’ concentrated layout of agricultural products ETFs is also based on judgments about geopolitical situations and market trends.

Wang Xiang, fund manager of Bosera Oil & Gas ETF, stated that there have been three instances since 2000 where oil prices and agricultural products moved in tandem, with correlations between corn, oils, beans, and crude oil exceeding 75%. The current rise in oil prices is expected to improve profitability at the planting end and transmit upstream along the industry chain.

Zhang Jing, analyst at Jianghai Securities, explained that the increase in crude oil prices affects agricultural product prices through multiple channels: from substitution demand—since over 40% of ethanol in the U.S. has been used for fuel ethanol since 2014, and Brazil’s gasoline-ethanol blend ratio reaching 30%, rising oil prices directly boost demand for fuel ethanol and related oils, raising prices of crops like corn and sugarcane; from input costs—geopolitical instability stimulates prices of nitrogen, potassium fertilizers, and glyphosate, impacting agricultural product prices; and from logistics—disruptions in shipping increase logistics costs, pushing up related product prices.

Risks and Opportunities Coexist

If geopolitical conflicts are external catalysts, then the bottom of the cycle in the breeding industry chain provides internal support for institutional positioning.

Huatai Securities’ agricultural research team noted that the pig breeding industry is experiencing cash flow losses, with slaughter weights continuing to increase passively, indicating that industry inventory pressure has not been fully released, and pig prices are likely to bottom out persistently. As cash flow continues to deplete, capacity reduction is expected to accelerate again. Reviewing the 2023 capacity reduction trend, sector stock prices often start to decline sharply when pig prices fall rapidly and piglet prices also decline, with the current phase of capacity reduction seeing pig prices falling more than expected, which is a key catalyst for the market, and the sector’s current position is relatively low.

Under the resonance of multiple factors, the enthusiasm for agricultural product tracks continues to rise, but investors should remain aware of the risks. One fund manager suggested that oil price movements are uncertain, and if geopolitical tensions ease, it could weaken the investment logic for related industries. The capacity reduction process for pigs may fall short of expectations, and if pig prices rebound too early, breeding companies might delay capacity reduction. The profit realization ability of listed companies also faces some uncertainties.