China Grain ETFs Surge as Investors Bet on El Niño Impact

Grain-themed exchange-traded funds (ETFs) have seen significant gains in China, dominating the rankings and attracting substantial investments. On September 8, a wave of grain ETFs surged by more than 4%, with the Invesco Grain ETF leading the pack at 4.77%. Since August, grain-related ETF shares have experienced a net increase of 1.083 billion units, drawing in net inflows of RMB 818 million.

The rally is largely attributed to investors betting on the severe impact of an exceptionally strong El Niño event on global food supplies. According to monitoring by the National Climate Center, this El Niño episode is poised to reach 'super-strong' intensity due to unusually warm sea surface temperatures and is expected to persist through the summer of 2027.

Several international investment banks have issued warnings about the risk of food inflation, with JPMorgan forecasting that global food inflation will rise from 2.8% in the first half of 2026 to 5% in the first half of 2027. Liu Tingyu, fund manager of the Yongying Grain ETF, believes that the ongoing El Niño phenomenon is driving rising global agricultural commodity prices.

The USDA's August Supply and Demand Report highlighted a supply-demand gap of approximately 19.41 million tonnes for corn production, with wheat production forecast to fall 2.9% to 819 million tonnes. Crop condition ratings are also reflecting weather-related shocks, with the U.S. corn good-to-excellent rating at 60%, down 11 percentage points from the same period last year.