Agriculture ETFs for Now and Later

Brittney Barrett  |

Food prices are on the rise across the globe, a trend that is unlikely to let up as the population continues to grow and push up demand for sustenance. People in search of a long-term investment idea may want to think about food and related industries, which will push higher as the demand for basic edible goods increases. While the price of gold vacillates by the day and the latest tech bubble may end in a giant pop, it’s challenging to find an industry based on conditions as predictable as the fact there are more mouths to feed every day. Top investors have been finding ways to capitalize on this for some time, noting the inflation that is especially prevalent among food providers. Warren Buffet recently added Brasil Foods (NYSE: BRSF) to his portfolio and has made numerous comments on the agriculture industry. Chief among the reasons for his statement and the appeal of these kinds of investments is the demand food and the commodities employed in its production are outpacing supply increases.

Among the options for Food Investments are Agriculture ETFs. Agriculture ETFs have been rising for months as investors respond to reports that the global middle class is growing and commodities prices reflecting rising demand for agriculture products.

Out of the long list of food related commodities, corn has been of particular interest for investors and appears well positioned for even further growth. The rise of corn is directly related to the growth of the middle class. More people can afford to consume protein rich foods, or livestock, which means there needs to be more livestock to meet the demand. More livestock means more animals to feed. Animals are fed corn. Compounding this is the integration of more biofuel in the energy economy. Like livestock feed, biofuel is commonly made of corn, meaning the demand is being pushed higher on two ends.

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To capitalize on this phenomenon, an investor might choose to put money in an ETF, preferably one that hold future contracts, which rely somewhat more on current prices.  One corn ETF that has been extremely popular is Teucrium Corm (NYSE: CORN), which holds corn futures. The stock has been around since June and went up 30% in its first five months.

Grain is another area of interest for investors looking to get involved with Agriculture ETFs. The trend toward meat based diets, especially in China, on the surface would seem to negatively affect grain but instead, the opposite is true. Every single kilo of animal protein requires roughly 10 kilos of plant protein. The implications of what that means for futures of barely and maize are tremendous. Investors looking to go to the bank of this development should look into iPath DJ-UBS Grains TR Sub-Idx ETN (NYSE: JJG), which tracks grain futures.

Eating corn and grains is about to get a lot more expensive so it seems wise to pad pockets with the profits from the rise while the going is still good.

Jim Rogers, who co-founded Quantum Fund with George Soros and is credited with forecasting the commodities boom of 1999, sees a second coming on the horizon. A crisis point is upon us as the  population balloons from 6.7 billion to  9.1 billion in the next 40 years, putting demand, and prices through the roof.

. "If I'm right,” he said to the Wall Street Journal earlier this month, “agriculture is going to be one of the greatest industries in the next 20 years and longer . . . [it] will become more profitable than it has ever been.”

Investing in Agriculture ETFs doesn’t have to be like a horserace where the money has to go on a single steed. Funds like Powershares DB Agriculture (NYSE: DBA) hold a variety of futures from sugar to wheat to soybeans.

Regardless of the route pursued in investing in ETFs, the arguments of population growth and its effects are indisputable. When 40 years down the line, there an extra three mouths to feed for every one currently living 4, a well placed investment in agriculture might be the ticket procuring the extra funds it will take to eat.


DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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