(Seoul = Yonhap News) Reporter Lim Eun-jin = With Super El Nino expected until early next year, securities companies suggested paying attention to companies that can convert supply shocks into prices and profits.
According to the financial investment industry and Yonhap Infomax on the 6th, the World Meteorological Organization (WMO) announced that the probability of El Niño occurring from September to November of this year is 100%, and the probability of El Niño occurring from December to February of next year is 100%.
In particular, in the case of this El Niño, the recent sea surface temperature was found to reach 2.2 to 2.6 degrees compared to the average year.
When the sea surface temperature is more than 2.0 degrees higher than normal, it is informally called Super El Niño, and meteorological experts from each country predict that this will be the strongest ever, surpassing El Niño that started in 1997, 2015, and 2023.
Accordingly, securities companies predicted that industries that are greatly affected by El Niño would receive investor attention.
El Niño is known to affect agricultural crops by causing heat waves, droughts, and floods depending on the region.
The rise in prices due to the decline in agricultural production spreads to the fertilizer and feed industries as well as the processed food and livestock industries, affecting prices.
In fact, the price of wheat futures for September delivery traded on the Chicago Board of Trade (CBOT) rose 12.01% on the 4th (local time) from last month, and soybeans rose 10.39%.
Due to this influence, among related products listed on the domestic stock market, 'KB Leveraged Wheat Futures ETN' rose by 15.34%.
Kim Jun-seop, a researcher at KB Securities, said, "The European Central Bank (ECB) analyzed that a strong El Niño would raise global food raw material prices by up to 9% within 16 months. Between 2015 and 2016, Malaysian palm oil production decreased by about 13% and the price rose by 23%."
In addition, there is a possibility that mineral mining will be affected and the supply of non-ferrous metals may be disrupted.
Recently, Chile's copper production has been stagnating due to bad weather and mining accidents, and in relation to this, Bloomberg News, citing experts, reported that mining disruptions are more noticeable in years when El Niño occurs.
However, securities companies pointed out that rather than purchasing related stocks such as agricultural products or fertilizers in bulk, they should select companies that can convert the supply shock caused by El Niño into prices and profits.
Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The most important competitiveness of a company in the climate inflation phase is its pricing power. Even if the cost rises, there is a high possibility that the performance differentiation between companies that can protect their gross profit ratio by raising the sales price and those that cannot can increase."
For example, he said, "Food companies do not simply benefit from rising product prices. Companies with strong brands, high market share, long-term procurement contracts, and stable supply chains have greater capacity to absorb shocks compared to their competitors."
In the long term, he added, “It is appropriate to approach looking for industries where CapEx (capital expenditures) is structurally increasing due to recurring climate volatility,” adding, “It is necessary to pay attention to climate adaptation industries such as water management, power grids, and precision agriculture.”
