Agricultural commodity exchange-traded notes posted gains of 6% to 9% month-to-date through May 10, led by the Meritz Leveraged Representative Agricultural Commodity Futures ETN(H) which rose 9.12% to close at 10,230 won, according to Korea Exchange data. The rally was driven by forecasts of a Super El Niño event, with the U.S. National Oceanic and Atmospheric Administration assigning a 63% probability that sea surface temperatures will exceed 2°C above average around November. The ETN performance contrasted sharply with the KOSPI index, which plunged 11.80% over the same period from the 8,470 range to the 7,470 range amid volatility in semiconductor large-cap stocks including Samsung Electronics and SK Hynix.
Leveraged Grain ETNs Post 6-9% Gains Through May 10
The Meritz Leveraged Representative Agricultural Commodity Futures ETN(H) closed at 10,230 won on May 10, up from 9,375 won at the end of the previous month, marking a 9.12% month-to-date gain. The product tracks twice the daily return of an index composed of wheat, corn, and soybean futures. Individual grain-focused leveraged products also advanced: the Hana Leveraged Corn Futures ETN(H) rose 8.77%, the KB Leveraged Wheat Futures ETN gained 8.70%, the Hana Leveraged Soybean Futures ETN(H) climbed 6.54%, and the Mirae Asset Leveraged Corn Futures ETN posted a 5.89% return over the same period.
Chicago Board of Trade wheat futures rose 5.3% and soybean futures gained 5.6% versus the end of the previous month as of May 9. The price increases reflected market concerns that extreme weather could disrupt crop conditions and supply in major producing regions.
NOAA Forecasts 63% Probability of Super El Niño by November
The U.S. National Oceanic and Atmospheric Administration determined that El Niño conditions began in May. El Niño occurs when sea surface temperatures in the equatorial eastern Pacific remain above average, triggering extreme weather patterns including droughts and floods depending on the region. NOAA forecasts a 63% probability that a Super El Niño—defined as sea surface temperatures exceeding 2°C above average—will develop around November. El Niño events can increase rainfall in the central United States, southwestern Brazil, and Argentina, while reducing precipitation in Indonesia, Vietnam, and India in the western Pacific region.
Daeshin Securities Flags Cocoa Supply Risks Over Grains
Daeshin Securities researcher Choi Jin-young analyzed that grain prices underperformed during past Super El Niño periods from late 2014 to 2016 and from 2023 to 2024. The firm assessed that improved rainfall conditions in major grain-producing regions could limit upside price potential for soybeans, corn, and wheat during the current El Niño phase. In contrast, cocoa, coffee, and raw sugar—classified as soft commodities—face greater vulnerability to El Niño-driven supply disruptions. Reduced rainfall in Indonesia, Vietnam, and India during El Niño events can impact production of Indonesian cocoa and palm oil, Vietnamese robusta coffee, and Indian and Thai raw sugar. Cocoa faces extended climate exposure because harvesting occurs year-round, unlike seasonal grain crops. Daeshin Securities noted that the global cocoa supply surplus forecast for 2026-2027 was revised down from 267,000 tons to 149,000 tons, projecting that soft commodity price volatility may exceed grain volatility during this El Niño cycle.
LS Securities Warns of Margin Pressure for Food Manufacturers
LS Securities researcher Park Sung-ho analyzed that rising raw material costs will pressure profitability for food companies. Confectionery and beverage firms with high cocoa, coffee, and raw sugar usage, along with instant noodle manufacturers reliant on palm oil, face increased cost burdens. The actual earnings impact on individual companies will depend on their ability to pass costs through to consumers via product price increases, according to the analysis.
FAQ
What caused agricultural commodity ETNs to rise through May 10?
Agricultural commodity ETNs gained 6% to 9% month-to-date through May 10 due to forecasts of a Super El Niño event. The U.S. National Oceanic and Atmospheric Administration assigned a 63% probability that sea surface temperatures will exceed 2°C above average around November, raising concerns about potential weather disruptions to crop production and supply in major agricultural regions.
Why does Daeshin Securities expect cocoa prices to be more volatile than grain prices during El Niño?
Daeshin Securities assessed that El Niño conditions may increase rainfall in major grain-producing regions including the central United States, southwestern Brazil, and Argentina, potentially improving crop conditions and limiting grain price gains. Conversely, El Niño typically reduces rainfall in Indonesia, Vietnam, and India, threatening production of cocoa, coffee, and raw sugar. Cocoa faces extended exposure because harvesting occurs year-round. The firm noted that the global cocoa supply surplus forecast for 2026-2027 was revised down from 267,000 tons to 149,000 tons.
How did agricultural ETN performance compare to the KOSPI index through May 10?
Agricultural commodity leveraged ETNs posted gains of 6% to 9% month-to-date through May 10, while the KOSPI index fell 11.80% over the same period. The index declined from the 8,470 range to the 7,470 range amid increased volatility in semiconductor large-cap stocks including Samsung Electronics and SK Hynix.
