Agri output likely contracted in 3Q

From AB Capital's The Opening Bell: Three Moves

Event

The DA expects agricultural output to have contracted in 3Q26 after expanding in 2Q26, with weakness potentially extending through 1Q27 as El Niño intensifies. Heavy rains and flooding hurt recent production, while hotter, drier conditions are expected to become more pronounced early next year.

View

We think the GDP drag could become meaningful if the contraction persists. Agriculture, forestry and fishing accounted for 7.5% of 2Q26 GDP, so a 3.0pp deterioration in sector growth would reduce headline GDP growth by roughly 0.2pp, all else equal.

Catalyst

The larger risk is food inflation into early 2027. September food inflation already reached 6.8%, and El Niño could tighten crop supply further. Government irrigation, fertilizer, seed and Kadiwa measures should help, while ample chicken and pork inventories provide some buffer outside crops.

Action

In our view, a multi-quarter farm contraction would weaken the growth rebound while keeping food inflation sticky, reinforcing a restrictive BSP stance. For equities, we would favor value-oriented staples and defensive recurring income names, while remaining selective on consumer discretionary names.

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