Wanlian Securities: Super El Niño has reached the supply shock and transmission along the chain

The Zhitong Finance App learned that Wanlian Securities released a research report saying that this round of El Niño has been confirmed as a super level, and it will be the strongest event since systematic monitoring was carried out. The climate impact of El Niño will gradually be transmitted along the industrial chain. High temperatures and droughts in Southeast Asia and South Asia are compounded by restrictions on access to the Panama Canal, impacting agricultural product supply from both sides; midstream varieties are clearly affected, and palm oil production is most likely to be reduced but the time is the longest. The net impact of sugar depends on Brazil's sugar production ratio. Low stocks amplify the elasticity of corn, and rubber needs to continuously track inventory and downstream demand in production areas; downstream seed industry, agrochemistry, and aquaculture are lagging behind by about a year. The current sector's weather forecast pricing is sufficient. Subsequent excess earnings depend on the implementation of production cuts. The allocation should focus on varieties with concentrated production areas, low inventory, and the same policy.

The main views of Wanlian Securities are as follows:

This El Niño incident has been confirmed to be “super strong”

El Niño is a climatic phenomenon where the sea temperature of the equator is abnormally warm in the Middle East and Pacific Ocean and changes global atmospheric circulation. It will cause high temperatures and droughts in Southeast Asia and an increase in precipitation on the west coast of South America, affecting global crop production. At the same time, the drought in Central America lowers the water level of the Panama Canal and Lake Gatong, and restrictions on draught water and traffic become stricter, and the landing cost of grain routes from the US to Asia will rise accordingly. In this round of El Niño events, ONI picked up rapidly after entering an upward channel in the spring of 2026. On October 9, 2026, the National Climate Center confirmed that a super El Niño event had officially formed in September, and that this event will be the strongest since systematic monitoring. The peak is expected to occur in late autumn and early winter.

The impact of El Niño is transmitted along the industrial chain, and the impact paths and rhythms of each link are clearly differentiated

In terms of large varieties, palm oil production is reduced through the three timelines of gender differentiation, inflorescence failure, and fruit cluster development. The probability of production reduction is high but the timing of delivery is high; rubber production will be reduced due to the Southeast Asia drought and damage to rubber trees; white sugar has a hedging pattern of reduced production in the northern hemisphere and abundant production in the southern hemisphere. The net impact depends on the sugar production ratio in Brazil; corn and soybeans usually tend to be abundant, but the flooding in South America caused by this extreme incident, as well as the current drought in the US production area, will all have an impact on crop yields. On the industrial side, the breeding industry starts with a rise in growers' appetite for stress resistance. Drought is expected to strengthen breeding and promotion demand for stress-resistant varieties and improve transmission through orders; agrochemicals are related to farmers' planting budgets. After rising food prices improve planting income, demand for pesticides and chemical fertilizers expands, and budget adjustments need to wait for a complete planting season; in terms of farming, rising prices of raw materials such as soybean meal raise feed costs and increase breeding losses, which in turn accelerates production capacity removal, corresponding to the contraction of commercial pig supply after about 10 to 12 months.

Investment advice

Currently, weather pricing in the agriculture and animal husbandry sector is quite adequate. The beta market is basically over, and excess profits depend on the pace at which production cuts are realized. On the variety side, relative returns will mainly depend on whether production losses can be verified, the thickness of inventory safety pads, and whether the policy is consistent with the direction of production reduction; on the industrial chain side, the export chain is the first to implement, and the defensive nature of rigid agricultural materials is prominent. The bank maintains the agricultural and animal husbandry industry's “better than the market” rating. It is recommended to focus on two main lines: 1) companies in the relevant industry chain that may benefit from rising agricultural product prices; 2) seed industry companies where demand for stress-resistant varieties may increase under extreme weather, and agricultural companies with rigid export chains and demand.

Risk factors: risk that El Niño intensity and duration will fall short of expectations; risk of inventory and policy hedging; risk of downstream demand and transmission falling short of expectations.