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Agricultural stocks to wither as farm products prices decline

Updated: 2011-12-28 13:28

By Gao Changxin (China Daily)

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SHANGHAI - Agriculture stocks have further to fall next year, depressed by declining farm product prices, though some high-tech seed companies might outperform, stock analysts said.

Agricultural stocks to wither as farm products prices decline

A vegetable market in Huaibei, Anhui province. Farm-related stocks are expected to slump in 2012, despite the benefits that some high-tech seed companies might get from pending government policies, analysts said. [Photo /China Daily] 

An annual central government rural work conference focusing on boosting agricultural technology failed to lift the agricultural sector on Tuesday. The Shenzhen Stock Exchange's agriculture and forestry index dropped 3.74 percent, or 28.32 points, to 728.17, reversing a gain on Monday.

The conference will map out national policies for agricultural and rural development in 2012. The policies are scheduled to be announced in January.

The China News Service, China's second-largest news agency, reported on Tuesday that the policies would include fiscal support for farming technology.

The sector declined amid a slide of the major Shanghai Composite Index, which dipped 1.09 percent to 2166.20 points, the lowest close since March 2009, after a report showed profit growth for industrial companies in the first 11 months of the year decelerated.

"Agricultural stocks already digested the news," said Zhang Xi, an agriculture analyst with Dalian-based Daton Securities Co Ltd.

"Today they were driven down by the market plunge. Small-cap agricultural stocks are very sensitive to market swings."

Grand Agriseeds Technology Inc led the decline among agricultural companies. It fell 7.72 percent to 19.96 yuan ($3.15).

The agriculture and forestry index, which tracks all agriculture companies on the Shenzhen Stock Exchange, has plummeted about 19 percent this month. Analysts said that declining agricultural product prices will bring the index even lower next year.

The National Agricultural Products Wholesale Price Index gained 0.1 point on Tuesday to 190.7 points. It has shed more than 8 points from a record high of 198.3 points in September. The index is based on the prices of 489 agriculture products observed at 500 wholesale markets nationwide.

"Going forward, we expect a bad time for agriculture stocks, though government policies next year might help a few stocks post short-term rallies," said an analyst with Huatai United Securities Co Ltd who declined to be identified, citing corporate policies.

Wang Yin, an analyst with Minsheng Securities Co Ltd, said that high-tech seed companies will benefit the most from the government's new policies.

She said new policies will alleviate industry competition and help big seed companies gain market share. Wang recommended the shares of Yuan Longping High-Tech Agriculture Co Ltd and Shandong Denghai Seeds Co Ltd.

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