Sudden surge! Middle East tensions threaten food security, concept stocks lead the early trading gains

In the early trading session on March 30, food-related stocks saw unusual price spikes and a straight-line surge. As of the morning close, the sector jumped 3.11%, leading all market concept sectors. By individual stocks, Xinong Development, Beidahuang, and Jinjian Milled Rice hit the daily limit; Suqian Nongfa rose more than 7%; Xinsai Co., Ltd. and Nongfa Seed Industry rose more than 5%; Wanyou Degong and QuanYin High-Tech rose more than 4%; while Longping Hi-Tech, Sinong Seed Industry, Dunhuang Seed Industry, Zhejiang Nongfa Shares, Kangnong Seed Industry, and COFCO Agriculture all rose more than 3%.

The situation in the Middle East is affecting food security

After the United States and Israel launched military strikes against Iran in late February, shipping through the Strait of Hormuz has remained obstructed. Global resource markets have taken a major hit, and the fertilizer supply chain has also been disrupted, prompting market attention on global food security issues.

As one of the key international transportation routes, the Strait of Hormuz directly affects the international supply of fertilizer. Globally, about one-third of seaborne fertilizer and nearly half of sulfur are transported through the Strait of Hormuz. Blocking this strait has a negative impact on global fertilizer transport, causing fertilizer prices to surge sharply.

As of the time of the March 30 report, on the U.S. Chicago futures exchange, urea futures were quoted at $687.5 per ton, up 47.70% from $465.5 per ton before the outbreak of the U.S.-Israel-Iran conflict, and up more than 80% year over year.

Image: Urea prices, TRADING ECONOMICS

From a global perspective, Gulf countries are major fertilizer exporters. In 2023, the urea export volumes of countries such as Saudi Arabia, Qatar, and Oman accounted for 94% of the total exports of Gulf countries, while anhydrous ammonia exports accounted for 98% of the total exports of Gulf countries. Gulf countries also produce about one-fifth of the world’s phosphate fertilizers, with Saudi Arabia being the world’s main phosphate fertilizer exporter.

In addition, Iran has the world’s second-largest natural gas reserves. Natural gas is a key raw material for manufacturing nitrogen fertilizers, and sulfur obtained through natural gas desulfurization is also a major raw material for producing phosphate fertilizers. In the near term, disrupted shipping and interruptions in natural gas supply have already forced many fertilizer plants to cut output or even shut down. After Qatar’s LNG facilities were attacked, it paused production at the world’s largest urea plant, and India and Bangladesh also shut down parts of their fertilizer production capacity.

The strategic position of food security is prominent

In its March analysis and forecast, the World Food Programme said that if the fighting continues, the problem of global food security in the coming months may worsen. Among them, the number of people facing food insecurity in West Africa and Central Africa is expected to increase by 21%, East Africa and Southern Africa by 17%, and Asia by 24%.

Michael Wolz, a senior fellow focusing on food security at the U.S. Council on Foreign Relations, said, “A food disaster is about to come, yet we are still talking only about natural gas prices.” To ease the pressure, some countries have begun drawing on reserves and adjusting supply routes. The United Arab Emirates said its strategic reserves of key supplies can sustain 4 to 6 months, and Saudi Arabia also ensured about 4 months of wheat supply through advance procurement.

China’s strategic position in food security is prominent. The 2026 “No. 1 Document” continues to emphasize keeping the national bottom line on food security and stabilizing and developing the production of grain and edible oils. For the first time, it highlights “stepping up” a new round of actions to increase grain production capacity by an amount of one trillion jin. It aims to keep grain output stable at around 1.4 trillion jin. For the first time, it proposes “implementing the food circulation quality-and-efficiency improvement projects,” and to implement the inter-provincial horizontal interest-compensation policies between grain producing and marketing areas. This means that major grain marketing areas (such as Guangdong and Zhejiang) will directly provide fiscal compensation or industry collaboration support to major grain producing areas (such as Heilongjiang).

An analysis view from Hu’an Securities’ research report points out that the supply of staple grains is relatively tight, and combined with geopolitical conflicts disrupting the global agricultural inputs supply chain, it further strengthens the underlying logic of food security. In addition, as external trade frictions intensify market uncertainty, the food sector attracts hedging funds due to rigid demand and low valuation characteristics.

In A-shares, food-related concept stocks have performed strongly overall this year. Among 30 concept stocks, 22 saw their share prices rise this year, with a median increase of 8.81%. Among constituent stocks, Asen Group had the largest rise, up more than 55% year-to-date; second was Nongfa Seed Industry, up more than 33% year-to-date. In addition, multiple stocks including Suqian Nongfa, Beidahuang, Denghai Seed, Shenzhen Grain Control, Xinsai Co., Ltd., Jinjian Milled Rice, Chuan Ning Biotech, and Longping Hi-Tech have all risen more than 10% year-to-date.

(Source: Oriental Fortune Research Center)