The root cause of this round of food crisis is not the reduction of crop production caused by the conflict between Russia and Ukraine, but the supply pressure caused by the restriction of exports and the obstruction of transportation. First of all, the bumper harvests in Russia and Brazil have filled the grain production reduction in Ukraine caused by the conflict. The impact of the grain production reduction is controllable, and there is limited room for grain prices to continue to rise. Secondly, Europe and the United States have begun to plan to help Ukraine export a large number of grain hoarded in the Black Sea ports due to the conflict by means of Railways and inland shipping, which can effectively alleviate the short-term food supply crisis in Europe. Finally, the international transfer purchase readjusted the global supply and demand of Shenzhen Agricultural Products Group Co.Ltd(000061) and weakened the impact of export restrictions.
Russia and Ukraine are both major agricultural producers, and the conflict between Russia and Ukraine has raised concerns about the food crisis. Russia and Ukraine account for 32.5% of the world’s wheat exports and 19.7% of the world’s corn exports. The conflict between Russia and Ukraine will directly affect the global Shenzhen Agricultural Products Group Co.Ltd(000061) supply. As a result of the conflict, the harvest of Winter Wheat in Ukraine last year decreased by about 20% and the output decreased by 6.4 million tons; The planting area of spring sown corn decreased by about 26% and the output decreased by 10.05 million tons.
Therefore, the market is worried about a food crisis and Shenzhen Agricultural Products Group Co.Ltd(000061) prices soared. However, the historic increase in Russian wheat and Brazilian corn has made up for the supply gap in Ukraine, and the impact of grain production reduction is controllable.
The root cause of the food crisis lies in the obstruction of international trade and the shortage of Shenzhen Agricultural Products Group Co.Ltd(000061) short-term supply. After the conflict between Russia and Ukraine, countries successively restricted Shenzhen Agricultural Products Group Co.Ltd(000061) exports. As of May 13, after India announced a ban on wheat export, 36 countries around the world have issued a ban on Shenzhen Agricultural Products Group Co.Ltd(000061) export, including Russia, Ukraine, India and other major grain producing countries in the world. The rise of international Shenzhen Agricultural Products Group Co.Ltd(000061) trade protectionism has led to a food supply crisis.
Combined with the food crisis caused by the reduction of global food production in 2012, we believe that the annual increase of international Shenzhen Agricultural Products Group Co.Ltd(000061) prices may fall back to 10% – 20%. The EU has begun to help Ukraine solve the problem of transport routes. International transfer purchase may occur, and Iran plans to increase the amount of grain and oil imported from Russia. Supply is expected to improve and a ceiling will be set on the international Shenzhen Agricultural Products Group Co.Ltd(000061) price.
The progress of the situation in Russia and Ukraine has seriously affected international commodity prices. From the perspective of global total supply and demand, the sharp reduction of grain production may not happen, and the growth of demand may be restrained with the rise of prices.
Overall, the risk of food crisis is controllable. The increase of Shenzhen Agricultural Products Group Co.Ltd(000061) price can be alleviated through international transfer purchase, but the increase of transportation cost will still push up grain prices. Due to the influence of sentiment and news, Shenzhen Agricultural Products Group Co.Ltd(000061) futures market has increased volatility and will remain high in the short term.
Risk tips: the deterioration of the situation in Russia and Ukraine, the unexpected Shenzhen Agricultural Products Group Co.Ltd(000061) export restriction policy, the impact of extreme weather on autumn planting, and the fluctuation of international commodity prices.
