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Monday, July 21st, 2014
SEOUL, KOREA - Investors in food and agriculture stocks are keenly interested in what's going on in Ukraine. That's because Ukraine is one of the world's biggest bread baskets and the country's relationships with Russia, the EU, and the United States are deteriorating rapidly after the Malaysian Airlines MH17 crash. Given Russia accounts for 17 percent of the world's wheat supply and Ukraine 10.5 percent, the escalation of tensions between the two countries bodes ill for the grain prices.
The Korean food stocks, which had been doing so well for the year to date due to falling international food prices and the strong won against the dollar, showed weakness on July 18. All food stocks including Crown Confectionery (-4.08%), Nongshim (-2.05%), Samyang Foods (-1.53%), Ottogi Co. (-0.98%), Lotte Confectionery (-0.96%), Daehan Flour Mills (-0.94%), and Samlip General Foods (-0.54%) declined on the day.
Fertilizer stocks that are closely linked to fluctuations in grain prices saw their prices fall. Namhae Chemical Corp. (-3.24%), EasyBio (-3.0%), and Chobi (-0.40%) all turned to the south.
Analysts worried that it would be problem if the hostilities continue for a long time. Woo Won-sung, Kiwoom Securities analyst, said, "In the short run, the incident has little impact on the food stocks as most food companies stock up their grain inventories for at least one month. Given Ukraine is one of the world's most important grain producers including wheat and corn, tensions lasting months or years would be a serious burden to food companies in terms of grain prices."
