Agricultural commodity exchange-traded notes (ETNs) listed on the Korea Exchange posted strong gains this month amid concerns that a Super El Niño event could disrupt crop yields. The Meritz Leveraged Representative Agricultural Futures ETN rose 9.1% this month to close at 10,230 won on the 10th, compared to 9,375 won at the end of last month, according to Korea Exchange data released on the 13th. Super El Niño refers to sea surface temperatures rising more than 2 degrees Celsius above normal, triggering extreme weather events such as heat waves and droughts that can damage agricultural production. The gains contrast with an 11.8% decline in the KOSPI index over the same period, as the benchmark fell from 8,470 to 7,470 amid volatility in large-cap semiconductor stocks.
Corn, Wheat, and Soy ETNs Outperform KOSPI
ETNs tracking individual grain commodities also posted gains this month. The Hana Leveraged Corn Futures ETN rose 8.8%, while the KB Leveraged Wheat Futures ETN and Hana Leveraged Soybean Futures ETN climbed 8.7% and 6.5% respectively. The Meritz product tracks twice the daily returns of the Bloomberg Representative Agricultural Index, which comprises soybean, wheat, and corn futures.
CBOT Wheat and Soybean Futures Rise on Chicago Exchange
International agricultural commodity prices also advanced. Wheat futures traded on the Chicago Board of Trade (CBOT) reached $611.25 on the 9th, up $30.5 (5.3%) from the end of last month, according to financial data provider Yonhap Infomax. Soybean futures rose 5.6% over the same period.
Analysts Note Regional Differences in El Niño Impact
El Niño typically causes droughts in Southeast Asia and increased rainfall in South America. This means coffee and cocoa prices could rise due to production challenges in Southeast Asia, while soybean and corn growing conditions may improve in major South American agricultural regions.
Daishin Securities Cites Weak Grain Prices During Past Super El Niño Events
Daishin Securities analyzed that grain prices remained subdued during previous Super El Niño periods from May 2023 to April 2024 and from November 2014 to April 2016, suggesting price gains may be limited this time.
LS Securities Analyst Warns of Cost Pressures for Food Companies
Park Seong-ho, an analyst at LS Securities, stated that confectionery and beverage companies with high usage of soft commodities such as cocoa, coffee, and raw sugar may face increased cost burdens. Park added that ramen manufacturers with high palm oil usage would also be affected.
FAQ
What did the Meritz Leveraged Representative Agricultural Futures ETN do this month?
The Meritz Leveraged Representative Agricultural Futures ETN rose 9.1% this month to close at 10,230 won on the 10th, compared to 9,375 won at the end of last month, according to Korea Exchange data released on the 13th.
Why are agricultural commodity ETNs rising?
Agricultural commodity ETNs are rising amid concerns that a Super El Niño event — defined as sea surface temperatures rising more than 2 degrees Celsius above normal — could trigger extreme weather events such as heat waves and droughts that damage crop yields.
